SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a)
OF THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
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[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Sec. 240.14a-11(c) or Sec. 240.14a-12
Fidelity Commonwealth Trust
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which
transaction applies:
(2) Aggregate number of securities to which
transaction applies:
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11:
(4) Proposed maximum aggregate value of transaction:
(5) Total Fee Paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a) (2)
and identify the filing for which the offsetting fee was paid previously. Identify the
previous filing by registration statement number, or the Form or Schedule and the date of
its filing.
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(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
SPARTAN (registered trademark) MARKET INDEX FUND
A FUND OF FIDELITY COMMONWEALTH TRUST
82 DEVONSHIRE STREET, BOSTON, MASSACHUSETTS 02109
1-800-544-8888
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
To the Shareholders of Spartan Market Index Fund:
NOTICE IS HEREBY GIVEN that a Special Meeting of Shareholders (the
Meeting) of Spartan Market Index Fund (the fund) will be held at the
office of Fidelity Commonwealth Trust (the trust), 82 Devonshire
Street, Boston, Massachusetts 02109 on November 19, 1997, at 10:00
a.m. The purpose of the Meeting is to consider and act upon the
following proposals, and to transact such other business as may
properly come before the Meeting or any adjournments thereof.
1(a). To approve an amended management contract for the fund.
1(b). To approve a new s ub- a dvisory
a greement for the fund.
2 . To amend the fund's fundamental investment limitation
concerning
diversification to exclude securities of other investment
companies from
the limitation.
The Board of Trustees has fixed the close of business on September
22, 1997 , as the record date for the determination of the
shareholders of the fund entitled to notice of, and to vote at, such
Meeting and any adjournments thereof.
By order of the Board of Trustees,
ARTHUR S. LORING, Secretary
September 22, 1997
YOUR VOTE IS IMPORTANT -
PLEASE RETURN YOUR PROXY CARD PROMPTLY.
SHAREHOLDERS ARE INVITED TO ATTEND THE MEETING IN PERSON. ANY
SHAREHOLDER WHO DOES NOT EXPECT TO ATTEND THE MEETING IS URGED TO
INDICATE VOTING INSTRUCTIONS ON THE ENCLOSED PROXY CARD, DATE AND SIGN
IT, AND RETURN IT IN THE ENVELOPE PROVIDED, WHICH NEEDS NO POSTAGE IF
MAILED IN THE UNITED STATES. IN ORDER TO AVOID UNNECESSARY EXPENSE, WE
ASK YOUR COOPERATION IN MAILING YOUR PROXY CARD PROMPTLY, NO MATTER
HOW LARGE OR SMALL YOUR HOLDINGS MAY BE.
INSTRUCTIONS FOR EXECUTING PROXY CARD
The following general rules for executing proxy cards may be of
assistance to you and help avoid the time and expense involved in
validating your vote if you fail to execute your proxy card properly.
1. INDIVIDUAL ACCOUNTS: Your name should be signed exactly as it
appears in the registration on the proxy card.
2. JOINT ACCOUNTS: Either party may sign, but the name of the party
signing should conform exactly to a name shown in the registration.
3. ALL OTHER ACCOUNTS should show the capacity of the individual
signing. This can be shown either in the form of the account
registration itself or by the individual executing the proxy card. For
example:
REGISTRATION VALID SIGNATURE
A. 1) ABC Corp. John Smith, Treasurer
2) ABC Corp. John Smith, Treasurer
c/o John Smith, Treasurer
B. 1) ABC Corp. Profit Sharing Plan Ann B. Collins,
Trustee
2) ABC Trust Ann B. Collins,
Trustee
3) Ann B. Collins, Trustee Ann B. Collins,
Trustee
u/t/d 12/28/78
C. Anthony B. Craft, Cust. Anthony B. Craft
f/b/o Anthony B. Craft, Jr.
UGMA
PROXY STATEMENT
SPECIAL MEETING OF SHAREHOLDERS OF
FIDELITY COMMONWEALTH TRUST: SPARTAN MARKET INDEX FUND
TO BE HELD ON NOVEMBER 19, 1997
This Proxy Statement is furnished in connection with a solicitation
of proxies made by, and on behalf of, the Board of Trustees of
Fidelity Commonwealth Trust (the trust) to be used at the Special
Meeting of Shareholders of Spartan Market Index Fund (the fund) and at
any adjournments thereof (the Meeting), to be held on November 19,
1997 at 10:00 a.m. at 82 Devonshire Street, Boston, Massachusetts
02109, the principal executive office of the trust and Fidelity
Management & Research Company (FMR), the fund's investment adviser.
The purpose of the Meeting is set forth in the accompanying Notice.
The solicitation is made primarily by the mailing of this Proxy
Statement and the accompanying proxy card on or about September 22,
1997. Supplementary solicitations may be made by mail, telephone,
telegraph, facsimile, or by personal interview by representatives of
the trust. In addition, Management Information Services Corp. (MIS)
and D.F. King & Co. Inc. may be paid on a per-call basis to
solicit shareholders on behalf of the fund at an anticipated cost of
approximately $1 4 ,000. The expenses in connection with
preparing this Proxy Statement and its enclosures and of all
solicitations will be borne by FMR. FMR will reimburse brokerage firms
and others for their reasonable expenses in forwarding solicitation
material to the beneficial owners of shares. The principal business
address of Fidelity Distributors Corporation (FDC), the fund's
principal underwriter and distribution agent, is 82 Devonshire Street,
Boston, Massachusetts 02109.
If the enclosed proxy card is executed and returned, it may
nevertheless be revoked at any time prior to its use by written
notification received by the trust, by the execution of a later-dated
proxy card, or by attending the Meeting and voting in person.
All proxy cards solicited by the Board of Trustees that are properly
executed and received by the Secretary prior to the Meeting, and which
are not revoked, will be voted at the Meeting. Shares represented by
such proxies will be voted in accordance with the instructions
thereon. If no specification is made on a proxy card, it will be voted
FOR the matters specified on the proxy card. Only proxies that are
voted will be counted towards establishing a quorum. Broker non-votes
are not considered voted for this purpose. Shareholders should note
that while votes to ABSTAIN will count toward establishing a quorum,
passage of any proposal being considered at the Meeting will occur
only if a sufficient number of votes are cast FOR the proposal.
Accordingly, votes to ABSTAIN and votes AGAINST will have the same
effect in determining whether the proposal is approved.
The fund may also arrange to have votes recorded by telephone. D.F.
King & Co. Inc. may be paid on a per call basis for
vote-by-phone solicitations on behalf of the fund at an anticipated
cost of approximately $ 4 ,000. The expenses in connection with
telephone voting will be borne by FMR. If the fund records votes by
telephone, it will use procedures designed to authenticate
shareholders' identities, to allow shareholders to authorize the
voting of their shares in accordance with their instructions, and to
confirm that their instructions have been properly recorded. Proxies
voted by telephone may be revoked at any time before they are voted in
the same manner that proxies voted by mail may be revoked.
If a quorum is not present at the Meeting, or if a quorum is present
at the Meeting but sufficient votes to approve one or more of the
proposed items are not received, or if other matters arise requiring
shareholder attention, the persons named as prox y agents may
propose one or more adjournments of the Meeting to permit further
solicitation of proxies. Any such adjournment will require the
affirmative vote of a majority of those shares present at the Meeting
or represented by proxy. When voting on a proposed adjournment, the
persons named as prox y agents will vote FOR the proposed
adjournment all shares that they are entitled to vote with respect to
each item, unless directed to vote AGAINST the item, in which case
such shares will be voted AGAINST the proposed adjournment with
respect to that item. A shareholder vote may be taken on one or more
of the items in this Proxy Statement prior to such adjournment if
sufficient votes have been received and it is otherwise appropriate.
On July 31, 1997 there were 50,419,682 shares of the fund issued and
outstanding. As of July 31, 1997, the Trustees and officers of the
trust owned, in the aggregate, less than 1% of the fund's total
outstanding shares. To the knowledge of the trust, substantial (5% or
more) record ownership of the fund on July, 31, 1997 was as follows:
National Financial Services Corporation, Boston, MA (15.78%). To the
knowledge of the trust, no other shareholder owned of record or
beneficially more than 5% of the outstanding shares of the fund on
that date. Shareholders of record at the close of business on
September 22, 1997 will be entitled to vote at the Meeting. Each such
shareholder will be entitled to one vote for each dollar of net asset
value held on that date.
FOR A FREE COPY OF THE FUND'S ANNUAL REPORT FOR THE FISCAL YEAR ENDED
APRIL 30, 1997 CALL 1-800-544-8888 OR WRITE TO FIDELITY DISTRIBUTORS
CORPORATION AT 82 DEVONSHIRE STREET, BOSTON, MASSACHUSETTS 02109.
VOTE REQUIRED: APPROVAL OF PROPOSAL S 1 (A), 1(B), AND 2
REQUIRES THE AFFIRMATIVE VOTE OF A "MAJORITY OF THE OUTSTANDING VOTING
SECURITIES" OF THE FUND. UNDER THE INVESTMENT COMPANY ACT OF 1940 (THE
1940 ACT), THE VOTE OF A "MAJORITY OF THE OUTSTANDING VOTING
SECURITIES" MEANS THE AFFIRMATIVE VOTE OF THE LESSER OF (A) 67% OR
MORE OF THE VOTING SECURITIES PRESENT AT THE MEETING OR REPRESENTED BY
PROXY IF THE HOLDERS OF MORE THAN 50% OF THE OUTSTANDING VOTING
SECURITIES ARE PRESENT OR REPRESENTED BY PROXY OR (B) MORE THAN 50% OF
THE OUTSTANDING VOTING SECURITIES. BROKER NON-VOTES ARE NOT CONSIDERED
"PRESENT" FOR THIS PURPOSE.
1. OVERVIEW OF PROPOSED APPOINTMENT OF BANKERS TRUST COMPANY AS
SUB-ADVIS E R FOR SPARTAN MARKET INDEX FUND
FMR currently serves as the fund's manager under a management
contract dated February 15, 1990. As manager, FMR's duties include
managing the fund's investments, supervising relationships with other
companies that provide the fund with services, and preparing general
shareholder communications, all subject to the continuing oversight of
the Board of Trustees. Other Fidelity companies maintain the fund's
shareholder accounts, provide customer services, and handle the daily
accounting of the fund's portfolio of investments. Custodial services,
including safekeeping of the fund's cash and the securities it owns,
are provided by a bank unaffiliated with Fidelity.
In June 1997, FMR proposed to the fund's Trustees that a
sub-advis e r be appointed to handle the day-to-day management of
the fund's investments and to provide custodial services. FMR
recommended that these services be provided by Bankers Trust Company
(BT), a major institutional money manager with substantial experience
in index fund management. FMR made the proposals as part of its
ongoing efforts to provide services to the fund efficiently and at low
cost.
Under the proposals, FMR would continue to serve as the fund's
manager and investment advis e r, but would delegate part of its
duties to BT. As sub-advis e r, BT would have day-to-day
responsibility for managing the fund's investments in accordance with
its policy of attempting to duplicate the performance of the Standard
& Poor's 500 Index (the S&P 500(registered trademark)). BT would also
provide custodial and securities lending services. FMR would be
responsible for overseeing BT's performance and would retain its other
management responsibilities, subject to oversight by the Board of
Trustees. All other fund services, including shareholder account
services, would be unchanged.
FMR also proposed to reduce the fund's management fee arrangement
and to adopt a fee structure consistent with the other index funds FMR
manages. Unlike most other Fidelity funds, which pay management fees
and other expenses separately, the fund pays a single "all-inclusive"
management fee that covers substantially all fund expenses. FMR
recommended eliminating the all-inclusive management fee structure,
and replacing it with the management fee structure used by the other
S&P 500 index funds FMR manages.
After consideration, the Trustees , including a majority of the
Trustees who are not "interested persons" of the fund, FMR or BT (the
Independent Trustees), approved FMR's proposals in July 1997.
The proposals would involve changes to the fund's
m anagement c ontract with FMR, discussed in Proposal
1(a), and adoption of a new sub-advisory agreement with BT ,
discussed in Proposal 1(b). The Trustees believe the proposals are in
the best interests of the fund and its shareholders, and recommend
that shareholders vote to approve the proposals. For additional
information on the Board of Trustees' considerations, see "Matters
Considered by the Board" on page .
Proposals 1(a) and 1(b) are contingent on each other and will not be
implemented unless both proposals are approved. The following pages
discuss the proposed arrangement s as a whole, and
provide information relevant to both proposals. Refer to each proposal
for more detailed information on the terms of each contract.
REASONS FOR PROPOSALS. FMR recommended appointment of a
sub-advis e r in order to reduce the costs of operating the fund.
In April 1997, FMR voluntarily lowered the fund's operating expenses
(with certain exceptions) to 0.19% of the fund's assets per
year , through December 31, 1999. The 0.19% expense level
is well below the amount (0.45%) that FMR is entitled to receive from
the fund. With an annual expense ratio of 0.19%, the fund is one
of the lowest-cost index funds, and one of the lowest-cost mutual
funds, in the United States.
BT is a well-recognized institutional money manager, with over 20
years ' experience in managing accounts indexed to the S&P 500
and other indexes. (For more information about BT, including
performance of a similar S&P 500 index fund managed by BT, see
"Activities and Management of Bankers Trust Company" on page .) As
of June 30, 1997, BT and its affiliates managed more than $250 billion
for mutual funds, pension funds and other institutions, including
approximately $50 billion in assets indexed to the S&P 500. This
represents almost three times the S&P 500 index assets under
management by FMR and its affiliates as of the same date
(approximately $1 7 billion). BT's commitment to the specialized
area of index account management allows BT to provide index fund
portfolio management services at a lower cost than if FMR provided
these services itself. FMR expects that the appointment of BT would
reduce FMR's portfolio management costs, and the cost to FMR of
helping to maintain the fund's expenses at their current
exceptionally low level.
CHANGES TO MANAGEMENT FEE STRUCTURE. Under the present
management contract, FMR is entitled to receive an "all-inclusive"
management fee at an annual rate of 0.45% of the fund's assets. For
this fee, FMR provides management services and also pays substantially
all other fund expenses. As discussed in Proposal 1(a), under the
proposed management contract FMR would receive a lower management fee
(0.24%) for management services only, and the fund would be
responsible for paying its other expenses unless they were borne by
FMR under a voluntary expense limit.
The current 0.19% expense limit is lower than FMR's fee under both
the current and proposed contracts. As a result, the change in
management fee structure would have no impact on the fund's expenses
at present. Based on factors such as the historical growth of the
fund's assets, its experience with expenses of comparable funds it
advises, and its estimates of long-term expense trends, FMR believes
that the fund's expenses under the proposed fee structure are likely
to be lower than the current 0.45% management fee rate when the 0.19%
expense limit expires at the end of 1999. However, because expenses
several years in the future cannot be predicted with any certainty,
lower expenses cannot be assured.
To protect the fund against this uncertainty, FMR agreed to
further limit the fund's expenses for three additional years if the
proposals are approved, to an annual rate of no more than 0.41%
(excluding sub-advisory fees associated with securities lending,
interest, taxes, brokerage commissions or extraordinary expenses) from
January 1, 2000 through December 31, 2003. Thereafter, the fund's
expenses could be higher or lower than the 0.45% level provided by the
current management contract.
SUB-ADVISORY FEES. BT's sub-advisory fees cover custodial services as
well as portfolio management services. The majority of BT's fees,
equal to 0.006% of the fund's average net assets, would be paid by FMR
and would have no effect on the fund's expenses. However, BT would
also receive fees based on a percentage of the fund's net income from
lending portfolio securities, which would be payable by the fund.
Under the proposals, BT would receive 40% of the net income from the
fund's securities lending activities, and the fund would receive the
remaining 60%. These fees would not be covered by FMR's voluntary
expense limitation, and would represent additional expenses to the
fund.
Securities lending is a means of earning a modest amount of
additional income by lending the fund's securities to other parties
temporarily. The party borrowing the securities (typically a
broker-dealer or other institution) provides collateral to secure the
loan, agrees to return the securities to the fund upon notice, and
pays the fund a fee for the loan ( or allows it to earn
income on the collateral). In its fiscal year ended April 30, 1997,
the fund earned no income from securities lending.
The amount of securities lending income that can be generated for the
fund will depend on market conditions and other factors. While
BT is experienced in the area of securities lending and is expected to
generate greater securities lending income than currently is
produced by the fund, securities lending income still is likely
to represent a small percentage of fund assets. BT has estimated that
the fund's income from securities lending (before fees) could equal
approximately 0.005% of the fund's assets per year, in which case BT
would receive 0.002% and the fund would retain the remaining 0.003%.
The 0.002% paid to BT would represent the additional fund
expense above the 0.19% expense limitation. However, because the fees
represent a percentage of net income, they would only be charged to
the extent that the fund has earned securities lending income.
IMPACT ON FUND EXPENSES. The following table illustrates the impact
of the proposals on the expenses of the fund before and after
the 0.19% expense limitation. All expenses are shown as annual
percentages of the fund's average net assets.
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Current* Proposed*
Management Fee (before reimbursement) 0.45% 0.24%**
Other Expenses (before reimbursement) 0.00% 0. 24 %
Gross Expenses (before reimbursement) 0.45% 0. 48 %**
Expenses Reimbursed by FMR (0.26%) (0. 29 %)
Total Operating Expenses (after reimbursement) 0.19% 0.19%**
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* Based on historical expenses for the fiscal year ended April 30,
1997. Proposed expenses based on terms of proposed contracts.
** Including sub-advisory fees equal to 40% of securities lending
income, estimated at 0.002% (not visible due to rounding).
These proposed modifications currently benefit FMR by reducing
its costs of providing investment management services and
maintaining the 0.19% expense limitation. However, they also represent
a reduction in the amount of fund expenses the fund could incur after
December 31, 2003 if the expense limitations were to change.
The following table illustrates the impact of the proposals on the
fund's expenses for the fiscal year ended April 30, 1997 after the
effect of the 0.19% expense limitation.
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Current Proposed
Management Fee ( after reimbursement) 0.19% 0.19%*
Other Expenses 0.00% 0.00%
Total Operating Expenses (after reimbursement) 0.19% 0.19%*
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* Including sub-advisory fees equal to 40% of securities lending
income, estimated at 0.002% (not visible due to rounding).
FMR has voluntarily agreed to limit the fund's total operating
expenses (including management fees but excluding interest, taxes,
brokerage commissions or extraordinary expenses) to 0.19% of the
fund's average net assets through December 31, 1999. If the proposals
are approved , the current 0.19% expense limit will remain in
effect through December 31, 1999; however, sub-advisory fees
associated with securities lending will not be subject to the limit.
These fees are estimated at 0.002% of average net assets of the
fund.
If the proposals are approved, FMR will voluntarily limit the
fund's total operating expenses (including management fees but
excluding sub-advisory fees associated with securities lending,
interest, taxes, brokerage commissions or extraordinary
expenses) to 0.41% of the fund's average net assets from January
1, 2000 through December 31, 2003.
1(A). TO APPROVE AN AMENDED MANAGEMENT CONTRACT FOR THE FUND.
The Board of Trustees, including a majority of the Independent
Trustees, has approved, and recommends that the shareholders of the
fund approve , an amended management contract with FMR ( the
Amended Management Contract ). The Amended Management Contract
allows for the appointment of a sub-advis e r to the fund
and modifies the management fee arrangement to make it consistent with
the management fee arrangement proposed to be adopted between
comparable Fidelity index funds and FMR.
PROPOSED MODIFICATIONS TO THE MANAGEMENT FEE STRUCTURE. The fund's
management fee is calculated and paid monthly, and is normally
expressed as an annual percentage of the fund's average net assets.
Under the fund's present management contract (the Present
Management Contract ) , the fund pays FMR an all-inclusive
management fee at an annual rate of 0.45% of the fund's average net
assets. FMR pays all of the fund's other expenses, with the following
exceptions: taxes; brokerage fees and commissions; interest on the
fund's borrowings, if any; the fees and expenses of the Independent
Trustees; and such non-recurring expenses as may arise, including the
costs of any litigation to which the fund may be a party, and any
obligation the fund may have to indemnify its officers and Trustees
with respect to litigation. FMR also provides for, and bears the cost
of, transfer agent, dividend disbursing services, and portfolio and
general accounting record maintenance through FSC. The fund's
management fee is reduced by the amount of compensation that the fund
pays to the Independent Trustees.
Under the Amended Management Contract, the fund would pay FMR a
management fee at an annual rate of 0.24% of the fund's average net
assets. Unlike the management fee under the Present Management
Contract, the management fee under the Amended Management Contract
would not be all-inclusive. Therefore, in addition to the management
fee and the other expenses (listed above) that the fund pays
under the Present Management Contract, the fund would pay its other
expenses as well (unless they were borne by FMR under a voluntary
expense limit).
Expenses payable by the fund, as provided in the Amended
Management Contract, could include: legal and audit expenses;
custodian, registrar, and transfer agent fees and expenses; the fees
and expenses related to the registration and qualification of the
trust and the fund's shares for distribution under state and federal
securities laws; the expenses of printing and mailing notices and
reports and proxy material to the fund's shareholders; all other
expenses incidental to holding meetings of the fund's shareholders,
including proxy solicitations therefor; a proportionate share of
insurance premiums and Investment Company Institute dues; and the
expenses of typesetting, printing, and mailing prospectuses and
statements of additional information to existing shareholders. In
addition, as described in Proposal 1(b), the fund would pay a fee to
BT equal to 40% of the fund's net securities lending income, estimated
at 0.002% of the fund's assets per year.
Currently, FMR has voluntarily agreed to limit the
fund's total operating expenses (including management fees but
excluding interest, taxes, brokerage commissions, or
extraordinary expenses) to 0.19% of the fund's average net assets
through December 31, 1999 . If this proposal and Proposal 1(b)
are approved, the 0.19% expense limit will remain in effect through
December 31, 1999; however, sub-advisory fees associated with
securities lending will not be subject to the expense limit.
These fees are estimated at 0.002% of average net assets of the
fund , as discussed above. In addition, if the proposals are
approved, FMR will voluntarily limit the fund's total operating
expenses (including management fees but excluding sub-advisory fees
associated with securities lending, interest, taxes, brokerage
commissions, or extraordinary expenses) to an annual rate of
0.41% of the fund's average net assets from January 1 ,
2000 through December 31, 2003. Thereafter, the fund's total
expenses could exceed the current 0.45% all-inclusive management
fee.
PROPOSED AMENDMENTS. A copy of the Amended Management Contract,
marked to indicate the proposed amendments, is supplied as Exhibit
1 on page . The proposed amendment s would add a
provision to expressly permit FMR to delegate investment advisory
authority to an investment adviser, and modify the management fee
structure as described above. In all other respects, the Amended
Management Contract is substantially identical to the Present
Management Contract. (For a discussion of the fund's Present
Management Contract, refer to the section entitled "Present Management
Contract" beginning on page .)
If approved by shareholders, the Amended Management Contract will
take effect on or about December 1, 1997 (or, if later, on
or about the first day of the first month following approval) and
will remain in effect through July 31, 1998, and thereafter only as
long as its continuance is approved at least annually by (i) the vote,
cast in person at a meeting called for the purpose, of a majority of
the Independent Trustees and (ii) the vote of either a majority of the
Trustees or a majority of the outstanding shares of the fund. If the
Amended Management Contract is not approved, the Present Management
Contract will continue in effect through July 31, 1998, and thereafter
subject to the same requirements for continuance as the Amended
Management Contract.
FMR estimates that the median management fee rate for non-Fidelity
S&P 500 index funds (prior to any reimbursement arrangements) is
0.36%, and the median total expense ratio for S&P 500 index funds and
classes (after reimbursement) is 0.45%. These estimates are based on
data for the 27 funds and 46 classes within the S&P 500 Index
objective (excluding funds with a master/feeder structure) according
to Lipper Director's Analytical Data - Second Edition 1997 (a
publication of Lipper Analytical Services, Inc., an independent
service that monitors the mutual fund industry).
CONCLUSION. Based on their evaluation of all material factors and
assisted by the advice of independent counsel, the Trustees concluded
(i) that the existing management fee structure and the exclusion of
the portion of the sub-advisory fees related to securities
lending to be paid by the fund from the voluntary expense
limitation are fair and reasonable and (ii) that the proposed
modifications to the management fee structure and the modification
permitting FMR to delegate investment management authority are in the
best interest s of the fund's shareholders. The Board of
Trustees, including a majority of the Independent Trustees,
voted to approve the submission of the Amended Management Contract to
shareholders of the fund and recommends that shareholders of the fund
vote FOR the Amended Management Contract.
Approval of the proposed Amended Management Contract is
contingent upon shareholder approval of the proposed new
s ub- a dvisory a greement (see Proposal 1(b)).
1(B). TO APPROVE A NEW SUB-ADVISORY AGREEMENT FOR THE FUND.
The Board of Trustees, including a majority of the Independent
Trustees, has approved, and recommends that the shareholders of the
fund approve, a sub-advisory agreement among the fund, FMR and BT
(the New Sub-Advisory Agreement ) .
Under the New Sub-Advisory Agreement, BT would be appointed
sub-advis e r to the fund and authorized, subject to the
supervision and direction of the Board of Trustees and/or FMR, to make
investment decisions for the fund, place orders to buy, sell and lend
the fund's portfolio securities , vote the fund's portfolio
securities, and manage the fund 's portfolio in accordance with
its current investment objectives and policies. In addition, BT would
serve as custodian to the fund. FMR, the current investment manager to
the fund, will continue as investment manager.
Under the New Sub-Advisory Agreement, FMR, not the fund, would pay BT
fees for providing investment management, securities lending and
custodial services to the fund at an annual rate of 0.006% of the
fund's average net assets. In addition, the fund would pay BT a
sub-advisory fee equal to 40% of net income from the fund's securities
lending program (estimated at 0.002% of average net assets of the
fund).
If the proposal is approved, FMR will no longer pay separately for
custodial services, which are covered by the fees payable under the
New Sub-Advisory Agreement. For custodial services to the fund for the
fiscal year ended April 30, 1997, FMR, under the all-inclusive
management contract, paid approximately $50,000 (0.003% of average net
assets) to the fund's custodian. In addition, Fidelity Service
Company, Inc. (FSC) will no longer administer the fund's securities
lending program. For the fiscal year ended April 30, 1997, FMR, under
the all-inclusive management contract did not incur any cost for
securities lending administration for the fund.
Currently, FMR has agreed to limit the fund's total operating
expenses (including management fees but excluding interest, taxes,
brokerage commissions, or extraordinary expenses) to 0.19% of the
fund's average net assets through December 31, 1999. If this proposal
and Proposal 1(a) are approved, the 0.19% expense limit will remain in
effect through December 31, 1999; however, sub-advisory fees
associated with securities lending will not be subject to the expense
limit. These fees are estimated at 0.002% of average net assets of the
fund, as discussed above. In addition, if the proposals are approved,
FMR will voluntarily limit the fund's total operating expenses
(including management fees but excluding sub-advisory fees associated
with securities lending, interest, taxes, brokerage commissions, or
extraordinary expenses) to an annual rate of 0.41% of the fund's
average net assets from January 1, 2000 through December 31, 2003.
Thereafter, the fund's total expenses could exceed the current 0.45%
all-inclusive management fee.
A copy of the New Sub-Advisory Agreement is supplied as Exhibit
2 on page . If approved by shareholders, the New
Sub-Advisory Agreement will take effect on or about December 1,
1997 (or, if later, on or about the first day of the first
month following approval) and will remain in effect through July 31,
1998, and thereafter only as long as its continuance is approved at
least annually by (i) the vote, cast in person at a meeting called for
the purpose, of a majority of the Independent Trustees and (ii) the
vote of either a majority of the Trustees or a majority of the
outstanding shares of the fund. If the New Sub-Advisory Agreement is
not approved, FMR will continue to manage the fund under the Present
Management Contract.
BT, a New York banking corporation with principal offices in New
York, is a wholly owned subsidiary of Bankers Trust New York
Corporation, the seventh largest bank holding company in the United
States. (For more information about BT, refer to the section entitled
"Activities and Management of Bankers Trust Company" beginning on
page ).
The New Sub-Advisory Agreement would be terminable on 60 days'
written notice by the Board of Trustees, FMR or BT and would terminate
automatically in the event of its assignment.
CONCLUSION. Based on their evaluation of all material factors and
assisted by the advice of independent counsel, the Trustees concluded
that the New Sub-Advisory Agreement is in the best interest of the
fund's shareholders. The Board of Trustees, including a majority of
the Independent Trustees, voted to approve the submission of the
New Sub-Advisory Agreement to shareholders of the fund and recommends
that shareholders of the fund vote FOR the New Sub-Advisory Agreement.
Approval of the proposed New Sub-Advisory Agreement is
contingent upon shareholder approval of the proposed Amended
Management Contract (see Proposal 1(a)).
MATTERS CONSIDERED BY THE BOARD
The mutual funds for which the members of the Board of Trustees serve
as Trustees are referred to herein as the "Fidelity funds." The Board
of Trustees meets eleven times a year. The Board of Trustees,
including the Independent Trustees, believe that matters bearing on
the appropriateness of the fund's management fees are considered at
most, if not all, of their meetings. While the full Board of Trustees
or the Independent Trustees, as appropriate, act on all major matters,
a significant portion of the activities of the Board of Trustees
(including certain of those described herein) are conducted through
committees. The Independent Trustees frequently meet in
executive session and are advised by independent legal counsel
selected by the Independent Trustees.
The proposals to present the Amended Management Contract and the New
Sub-Advisory Agreement to shareholders were considered and approved by
the Board of Trustees of the fund, including all of the Independent
Trustees, on July 17, 1997 and were also considered by the Board on
June 19, 1997. The Board of Trustees received materials relating to
the Amended Management Contract and the New Sub-Advisory Agreement in
advance of the meetings at which the Amended Management
Contract and the New Sub-Advisory Agreement were considered, and had
the opportunity to ask questions and request further information in
connection with such consideration.
The Board of Trustees was informed that FMR recommended that a
sub-advis e r be appointed to manage the fund's investments and
provide custodial services to the fund. The Trustees were informed
that FMR had considered and reviewed fee proposals from index fund
providers, including BT, and that FMR recommended that BT be appointed
as a sub-advis e r to the fund.
INFORMATION RECEIVED BY THE INDEPENDENT TRUSTEES. In connection with
their monthly meetings and as part of the management contract
renewal process, Trustees receive and review materials
relevant to the fund's management contract. These materials
include: (i) information on the investment performance of the fund, a
peer group of funds and the appropriate index, (ii)
sales and redemption data, and (iii) notable changes in the fund's
investments. The Board of Trustees and the Independent Trustees also
consider periodically other material factors such as (1) FMR's
financial condition, (2) arrangements in respect of the distribution
of the fund's shares, (3) the procedures employed to determine the
value of the fund's assets, (4) the allocation of the fund's
brokerage, if any, including allocations to brokers affiliated with
FMR, (5) FMR's management of the relationships with the fund's
custodian and subcustodians, (6) the resources devoted to and the
record of compliance with the fund's investment policies and
restrictions and with policies on personal securities transactions and
(7) the nature, cost, and audit of non-investment management services
provided by FMR and its affiliates.
In response to questions raised by the Independent Trustees and in
connection with the Trustee's review of the fund's management fee
structure, additional information was furnished by FMR including,
among other items, information on and analysis of (a) the overall
organization of FMR, (b) the impact of performance adjustments to
management fees of FMR funds, (c) the choice of performance indices
and benchmarks, (d) the composition of peer groups of funds, (e)
transfer agency and bookkeeping fees paid to affiliates of FMR, (f)
investment performance, (g) investment management staffing, (h) the
potential for achieving further economies of scale, (i) operating
expenses paid to third parties, and (j) the information furnished to
investors, including the fund's shareholders.
In considering the Amended Management Contract and the New
Sub-Advisory Agreement, the Board of Trustees and the Independent
Trustees did not identify any single factor as all-important or
controlling, and the following summary does not detail all of the
matters considered. Matters considered by the Board of Trustees and
the Independent Trustees include the following:
INVESTMENT COMPLIANCE AND PERFORMANCE. The Board of Trustees and the
Independent Trustees considered whether the fund has operated within
its investment objective and its record of compliance with its
investment restrictions. They also reviewed monthly the fund's
investment performance as well as the performance of a peer group of
mutual funds, and the performance of the appropriate index. The Board
of Trustees and the Independent Trustees considered the ability of the
fund to comply with its investment objectives under the
proposed sub-advisory arrangements with BT.
FMR'S PERSONNEL AND METHODS. The Board of Trustees , including
the Independent Trustees , annually review a report detailing
the background of the fund's portfolio manager, and the fund's
investment objective and discipline. The Independent Trustees have
also had discussions with senior management of FMR responsible for
investment operations, and the senior management of Fidelity's equity
group. Among other things , they considered the size, education
and experience of FMR's investment staff, its use of technology, and
FMR's approach to recruiting, training and retaining portfolio
managers and other research, advisory and management personnel.
BT'S PERSONNEL AND METHODS. The Board of Trustees and the Independent
Trustees have reviewed information concerning the fund's proposed
sub-advis e r, Bankers Trust Company. Among other things ,
they considered BT's organization , experience managing index
fund accounts, level of index fund assets under management, investment
performance, index fund investment management techniques, trading
practices, securities lending program, compliance procedures, proxy
voting procedures , custodian activities and foreign
subcustodian networks. The Board of Trustees and the Independent
Trustees reviewed the BT proposal for sub-advisory arrangements.
NATURE AND QUALITY OF OTHER SERVICES. The Board of Trustees and the
Independent Trustees considered the nature, quality, cost and extent
of administrative and shareholder services performed by FMR and
affiliated companies, both under the Amended Management Contract and
under separate agreements covering transfer agency functions ,
and pricing and bookkeeping. The Board of Trustees and the
Independent Trustees also considered the nature and extent of FMR's
supervision of third party service providers, principally custodians
and subcustodians.
EXPENSES. The Board of Trustees and the Independent Trustees
considered the fund's expense ratio and expense ratios of a peer group
of funds. They also considered the amount and nature of fees paid by
shareholders.
PROFITABILITY. The Board of Trustees and the Independent Trustees
considered the level of FMR's profits in respect of the management of
the Fidelity funds, including the fund. This consideration included an
extensive review of FMR's methodology in allocating its costs to the
management of the fund. The Board of Trustees and the Independent
Trustees have concluded that the cost allocation methodology employed
by FMR has a reasonable basis and is appropriate in light of all of
the circumstances. They considered the profits realized by FMR in
connection with the operation of the fund and whether the amount of
profit is a fair entrepreneurial profit for the management of the
fund. They also considered the profits realized from non-fund
businesses which may benefit from or be related to the fund's
business. The Board of Trustees and the Independent Trustees also
considered FMR's profit margins in comparison with available industry
data, both accounting for and ignoring marketing expenses.
OTHER BENEFITS TO FMR. The Board of Trustees and the Independent
Trustees also considered the character and amount of fees paid by the
fund and the fund's shareholders for services provided by FMR and its
affiliates, including fees for services like transfer agency, fund
accounting and direct shareholder services. They also considered the
allocation of fund brokerage to brokers affiliated with FMR and the
receipt of sales loads and payments under Rule 12b-1 plans in respect
of certain of the Fidelity funds. The Board of Trustees and the
Independent Trustees also considered the revenues and profitability of
FMR businesses other than its mutual fund business, including FMR's
retail brokerage, correspondent brokerage, capital markets, trust,
investment advisory, pension record keeping, credit card, insurance,
publishing, real estate, international research and investment funds,
and others. The Board of Trustees and the Independent Trustees
considered the intangible benefits that accrue to FMR and its
affiliates by virtue of their relationship with the fund.
OTHER BENEFITS TO SHAREHOLDERS. The Board of Trustees and the
Independent Trustees considered the benefit to shareholders of
investing in a fund that is part of a large family of funds offering a
variety of investment disciplines and providing for a large variety of
fund and shareholder services.
2 . TO AMEND THE FUND'S FUNDAMENTAL INVESTMENT LIMITATION
CONCERNING DIVERSIFICATION TO EXCLUDE SECURITIES OF OTHER INVESTMENT
COMPANIES.
The fund's current fundamental investment limitation concerning
diversification is as follows:
"The fund may not , with respect to 75% of the fund's total
assets, purchase the securities of any issuer (other than securities
issued or guaranteed by the U.S. government or any of its agencies or
instrumentalities) if, as a result, (a) more than 5% of the fund's
total assets would be invested in the securities of that issuer, or
(b) the fund would hold more than 10% of the outstanding voting
securities of that issuer."
The Trustees recommend that shareholders vote to amend the
limitation as follows:
"The fund may not , with respect to 75% of the fund's total
assets, purchase the securities of any issuer (other than securities
issued or guaranteed by the U.S. Government or any of its agencies or
instrumentalities, (( or securities of other investment
companies )) ) if, as a result, (a) more than 5% of the fund's
total assets would be invested in the securities of that issuer, or
(b) the fund would hold more than 10% of the outstanding voting
securities of that issuer."
The amendment would exempt investments in other investment
companies (such as other mutual funds) from the fund's diversification
policy. The amended language is consistent with the standards for
"diversified" mutual funds set out in the 1940 Act. If approved, the
amended limitation would permit the fund to invest without limit in
other investment companies' securities.
FMR anticipates that the amended limitation would facilitate
investment of the fund's cash position, by allowing the fund to invest
its cash in money market funds as well as in individual money market
securities. In accordance with an order of exemption granted by the
SEC, the fund may invest up to 25% of total assets in non-publicly
offered money market or short-term bond funds (the Central Funds)
managed by FMR or an affiliate of FMR. The Central Funds do not
currently pay investment advisory, management, or transfer agent fees,
but do pay minimal fees for services, such as custodian, auditor, and
Independent Trustees fees.
In addition, if proposals 1(a) and 1(b) are approved FMR
anticipates that Bankers Trust Company (BT) may make available one or
more money market funds managed by BT to serve as vehicles for
investment of cash collateral received with respect to securities
loans. BT has informed FMR that it intends to seek SEC permission to
implement such an arrangement for the fund and other funds whose
securities lending program it administers. If permitted by applicable
regulation, it may also be more efficient for BT to manage the fund's
other cash positions by investing in a BT money market fund pending
investment in stocks. In either case, the fund expects that it will
use a money market fund managed by BT if there are no material
increases in the fund's expenses. The fund may invest in a BT money
market fund if it is expected to benefit the fund by reducing costs
and/or providing greater returns on temporary cash investments.
If this proposal is approved, the amended fundamental diversification
limitation cannot be changed without the approval of the shareholders.
CONCLUSION. The Board of Trustees has concluded that the proposed
amendment will benefit the fund and its shareholders. The Trustees
recommend voting FOR the proposal. The amended fundamental
diversification limitation, upon shareholder approval, will become
effective when the disclosure is revised to reflect the changes. If
the proposal is not approved by the shareholders of the fund, the
fund's current fundamental diversification limitation will remain
unchanged.
OTHER BUSINESS
The Board knows of no other business to be brought before the
Meeting. However, if any other matters properly come before the
Meeting, it is the intention that proxies that do not contain specific
instructions to the contrary will be voted on such matters in
accordance with the judgment of the persons therein designated.
ACTIVITIES AND MANAGEMENT OF FMR
FMR, a corporation organized in 1946, serves as investment adviser to
a number of investment companies. Information concerning the advisory
fees, net assets, and total expenses of funds with investment
objectives similar to Spartan Market Index Fund and advised by FMR is
contained in the Table of Average Net Assets and Expense Ratios in
Exhibit 4 beginning on page .
FMR, its officers and directors, its affiliated companies, and the
Trustees, from time to time have transactions with various banks,
including the custodian banks for certain of the funds advised by FMR.
Those transactions that have occurred to date have included mortgages
and personal and general business loans. In the judgment of FMR, the
terms and conditions of those transactions were not influenced by
existing or potential custodial or other fund relationships.
The Directors of FMR are Edward C. Johnson 3d, Chairman of the Board
and of the Executive Committee; Robert C. Pozen, President; and Peter
S. Lynch, Vice Chairman. Each of the Directors is also a Trustee of
the trust. Messrs. Johnson 3d, Pozen, John H. Costello, Arthur S.
Loring, Robert H. Morrison, Richard A. Silver, Leonard M. Rush,
William J. Hayes, Robert A. Lawrence and Ms. Jennifer
Farrelly are currently officers of the fund and officers or
employees of FMR or FMR Corp. With the exception of M essrs .
Costello and Silver , all of these persons hold or have options
to acquire stock of FMR Corp. The principal business address of each
of the Directors of FMR is 82 Devonshire Street, Boston, Massachusetts
02109.
All of the stock of FMR is owned by its parent company, FMR Corp., 82
Devonshire Street, Boston, Massachusetts 02109, which was organized on
October 31, 1972. Members of Mr. Edward C. Johnson 3d's family are the
predominant owners of a class of shares of common stock, representing
approximately 49% of the voting power of FMR Corp., and, therefore,
under the 1940 Act may be deemed to form a controlling group with
respect to FMR Corp.
During the period May 1, 1996 through July 31, 1997, no
transactions were entered into by Trustees of the trust involving more
than 1% of the voting common, non-voting common and equivalent stock,
or preferred stock of FMR Corp.
ACTIVITIES AND MANAGEMENT OF BANKERS TRUST COMPANY
BT, a New York banking corporation with principal offices at 130
Liberty Street , New York, New York 10006, is a wholly owned
subsidiary of Bankers Trust New York Corporation whose principal
offices are also at 130 Liberty Street, New York, New York 10006. BT
was founded in 1903. As of December 31, 1996, Bankers Trust New York
Corporation was the seventh largest bank holding company in the United
States with total assets of approximately $120 billion. BT is a
worldwide merchant bank that conducts a variety of general banking and
trust activities and is a major wholesale supplier of financial
services to the international and domestic institutional markets.
Investment management is a core business of BT and it
affiliates with approximately $2 50 billion in assets under
management globally. Of that total, over $100 billion are in
United States equity index assets. When bond and international funds
are included, BT manages over $ 120 billion in total index
assets. This makes BT one of the nation's leading managers of index
funds and accounts .
In conjunction with its global custodial services, BT operates one
of the largest and most extensive securities lending programs. BT
serves as securities lending agent with respect to loan transactions
involving a daily average in excess of $50 billion on loan.
Approximately 90 lenders participated in BT's Program during 1996. BT
estimates that it usually effects more than 1,200 securities loan
transactions on behalf of these lenders each business day.
The table below shows the year-by-year total return of BT
Institutional Equity 500 Index Fund (the BT fund) as compared to the
total return of the S&P 500. The total return of the BT Fund is
historical and is not intended to indicate the past or future total
return of Spartan Market Index Fund or to be a substitute for the
total return of Spartan Market Index Fund. The table shows that, in
FMR's opinion, BT has experience in successfully managing an S&P 500
index fund and in tracking the return of the S&P 500.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Year ended 1993 1994 1995 1996 1997*
BT Fund** 9.94% 1.49% 37.69% 22.85% 30.24%
S&P 500 10.08% 1.32% 37.58% 22.96% 30.30%
</TABLE>
* through July 31, 1997
** The BT Fund commenced operations December 31, 1992. The BT Fund
has a total expense ratio of 0.10%, a $5 million minimum initial
investment and assets as of June 30, 1997 of approximately $1.5
billion. Spartan Market Index has a total expense ratio of 0.19%, a
$10,000 minimum initial investment and assets as of June 30, 1997 of
approximately $3.0 billion.
Information regarding the advisory or sub-advisory fees, net assets,
and total expenses of funds with investment objectives similar to
the fund and advised or sub-advised by BT is contained in Exhibit
5 beginning on page .
The name, address and principal occupation of each Director and the
principal executive officer of BT is provided on Exhibit 3
beginning on pag e .
No officer or trustee of the fund is an officer, employee or director
of BT. No officer or trustee of the fund owns any securities of, or
has any other material direct or indirect interest in, BT , Bankers
Trust New York Corporation, or any entity controlled by or under
common control with BT . During the period May 1, 1996 through
Ju ly 31 , 1997, no material transactions were entered into by
any trustee of the fund to which BT , Bankers Trust New York
Corporation, or any entity controlled by or under common control with
BT, is or was a party. There is no arrangement or understanding in
connection with the New Sub-Advisory Agreement with respect to the
composition of the Board of Trustees of the fund or of BT or with
respect to the selection or appointment of any person to any office of
either BT or the fund.
Payments were not made to BT or affiliates by the fund in the
last fiscal year.
BT has been advised by counsel that BT currently may perform the
services for each fund described in this proxy statement without
violation of the Glass-Steagall Act or other applicable banking laws
or regulations. State laws on this issue may differ from the
interpretation of relevant federal law and banks and financial
institutions may be required to register as dealers pursuant to state
securities law.
PRESENT MANAGEMENT CONTRACT
The fund employs FMR to furnish investment advisory and other
services. Under its management contract with the fund, FMR acts as
investment adviser and, subject to the supervision of the Board of
Trustees, directs the investments of the fund in accordance with its
investment objective, policies, and limitations. FMR also provides the
fund with all necessary office facilities and personnel for servicing
the fund's investments, compensates all officers of the fund and all
Trustees who are "interested persons" of the Trust or of FMR, and all
personnel of the fund or FMR performing services relating to research,
statistical, and investment activities.
In addition, FMR or its affiliates, subject to the supervision of the
Board of Trustees, provide the management and administrative services
necessary for the operation of the fund. These services include
providing facilities for maintaining the fund's organization;
supervising relations with custodians, transfer and pricing agents,
accountants, underwriters, and other persons dealing with the fund;
preparing all general shareholder communications and conducting
shareholder relations; maintaining the fund's records and the
registration of the fund's shares under federal and state laws;
developing management and shareholder services for the fund; and
furnishing reports, evaluations, and analyses on a variety of subjects
to the Trustees. Services provided by affiliates of FMR (other than
securities lending administration) will continue under the
proposed management contract described in P roposal 1 (a) .
FMR is responsible for the payment of all expenses of the fund with
certain exceptions. Specific expenses payable by FMR include, without
limitation, expenses for typesetting, printing, and mailing proxy
materials to shareholders; legal expenses, and the fees of the
custodian, auditor and interested Trustees; costs of typesetting,
printing, and mailing prospectuses and statements of additional
information, notices and reports to shareholders; the fund's
proportionate share of insurance premiums and Investment Company
Institute dues. FMR also provides for transfer agent and dividend
disbursing services and portfolio and general accounting record
maintenance through FSC, an affiliate of FMR.
FMR pays all other expenses of the fund with the following
exceptions: fees and expenses of all Trustees of the trust who are not
"interested persons" of the trust or FMR (the non-interested
Trustees); interest on borrowings; taxes; brokerage commissions (if
any); and such nonrecurring expenses as may arise, including costs of
any litigation to which a fund may be a party, and any obligation it
may have to indemnify the officers and Trustees with respect to
litigation.
FMR is the fund's manager pursuant to a management contract dated
February 15, 1990, which was approved by shareholders on September 19,
1990. The management fee paid to FMR is reduced by an amount equal to
the fees and expenses paid by the fund to the non-interested Trustees.
For the services of FMR under the contract, the fund pays FMR a
monthly management fee at the annual rate of 0.45% of average net
assets of the fund throughout the month. Fees received by FMR, after
voluntary reimbursement and reduction of fees and expenses paid by the
fund to the non-interested trustees, for the fiscal year ended April
30, 1997 from the fund were $6,527, 943 .
FMR may, from time to time, voluntarily reimburse all or a portion of
the fund's operating expenses (exclusive of interest, taxes, brokerage
commissions, or extraordinary expenses). FMR retains the
ability to be repaid for these expense reimbursements in the amount
that expenses fall below the limit prior to the end of the fiscal
year. Expense reimbursements by FMR will increase the fund's total
returns and repayment of the reimbursement by the fund will lower its
total returns.
During fiscal 1997, FMR voluntarily agreed to reimburse the fund to
the extent that its aggregate operating expenses, including management
fees, were in excess of an annual rate of 0.19% of average net assets
of the fund. If this reimbursement had not been in effect, for the
fiscal year ending April 30, 1997, FMR would have received
fees amounting to $6,712,742 which would have been equivalent to 0.45%
of average net assets of the fund (after reduction for compensation to
the non-interested Trustees).
PORTFOLIO TRANSACTIONS
Currently, all orders for the purchase or sale of portfolio
securities are placed on behalf of the each fund by FMR
pursuant to authority contained in the fund's management contract.
If Proposals 1(a) and 1(b) are approved, all orders for the
purchase or sale of portfolio securities will be placed on behalf of
the fund by BT pursuant to authority contained in the Amended
Management Contract and the New Sub-Advisory Agreement.
Currently, FMR may place agency transactions with National Financial
Services Corporation (NFSC) and Fidelity Brokerage Services (FBS),
indirect subsidiaries of FMR Corp., if the commissions are fair,
reasonable, and comparable to commissions charged by non-affiliated,
qualified brokerage firms for similar services. If Proposals 1(a)
and 1(b) are approved, BT may place agency transactions with BT
Brokerage Corporation, BT Alex Brown Incorporated or BT Futures
Corporation, indirect subsidiaries of Bankers Trust New York
Corporation, subject to the same conditions.
During fiscal 1997 the fund paid brokerage commissions of $483 to
NFSC and $0 to FBS. During fiscal 1997, this amounted to approximately
0.96% and 0.00%, respectively, of the aggregate brokerage commissions
paid by the fund.
SUBMISSION OF CERTAIN SHAREHOLDER PROPOSALS
The trust does not hold annual shareholder meetings. Shareholders
wishing to submit proposals for inclusion in a proxy statement for a
subsequent shareholder meeting should send their written proposals to
the Secretary of the Trust, 82 Devonshire Street, Boston,
Massachusetts 02109.
NOTICE TO BANKS, BROKER-DEALERS AND
VOTING TRUSTEES AND THEIR NOMINEES
Please advise the trust, in care of Fidelity Service Company, Inc.,
P.O. Box 789, Boston, Massachusetts 02102, whether other persons are
beneficial owners of shares for which proxies are being solicited and,
if so, the number of copies of the Proxy Statement and Annual Reports
you wish to receive in order to supply copies to the beneficial owners
of the respective shares.
EXHIBIT 1
FORM OF MANAGEMENT CONTRACT
The language to be added to the current contract is ((underlined))
and material to be deleted is set forth in [brackets].
MANAGEMENT CONTRACT
BETWEEN
FIDELITY COMMONWEALTH TRUST
SPARTAN MARKET INDEX FUND AND
FIDELITY MANAGEMENT & RESEARCH COMPANY
[AGREEMENT] ((Modification)) made this [15th] ((___)) day of
[February]((December)) [1990,]((1997,)) by and between Fidelity
Commonwealth Trust, a Massachusetts business trust which may issue one
or more series of shares of beneficial interest (hereinafter called
the "Fund"), on behalf of Spartan Market Index ((Fund)) (hereinafter
called the "Portfolio"), and Fidelity Management & Research Company, a
Massachusetts corporation (hereinafter called the "Adviser") ((as set
forth in its entirety below.))
1. (a) Investment Advisory Services. The Adviser undertakes to act as
investment adviser of the Portfolio and shall, subject to the
supervision of the Fund's Board of Trustees, direct the investments of
the Portfolio in accordance with the investment objective, policies
and limitations as provided in the Portfolio'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 Portfolio may
impose by notice in writing to the Adviser. The Adviser shall also
furnish for the use of the Portfolio office space and all necessary
office facilities, equipment and personnel for servicing the
investments of the Portfolio; 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. The Adviser is
authorized, in its discretion and without prior consultation with the
Portfolio, to buy, sell, lend and otherwise trade in any stocks, bonds
and other securities and investment instruments on behalf of the
Portfolio. The investment policies and all other actions of the
Portfolio 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 Portfolio, including but not limited
to: (i) providing the Portfolio with office space, equipment and
facilities (which may be its own) for maintaining its organization;
(ii) on behalf of the Portfolio, supervising relations with, and
monitoring the performance of, ((any sub-advis er s,))
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 Portfolio'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 Portfolio as an
investment vehicle.
The Adviser shall also furnish such reports, evaluations, information
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 undertakes to pay all expenses involved in the
operation of the Portfolio, except the following, which shall be paid
by the Portfolio: (i) taxes; (ii) the fees and expenses of all
Trustees of the Fund who are not "interested persons" of the Fund or
of the Adviser; (iii) brokerage fees and commissions; (iv) interest
expenses with respect to borrowings by the Portfolio; and (v) such
non-recurring and extraordinary expenses as may arise, including
actions, suits or proceedings to which the Portfolio is or is
threatened to be a party and the legal obligation that the Portfolio
may have to indemnify the Fund's Trustees and officers with respect
thereto. It is understood that service charges billed directly to
shareholders of the Portfolio, including charges for exchanges,
redemptions, or other services, shall not be payable by the Adviser,
but may be received and retained by the Adviser or its affiliates.]
[(d)](((c))) The [Adviser]((Adviser,)) shall place all orders for
the purchase and sale of portfolio securities for the Portfolio'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 Portfolio 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 Portfolio 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 Portfolio 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 Portfolio to determine
if the commissions paid over representative periods of time were
reasonable in relation to the benefits to the Portfolio.
The Adviser shall, in acting hereunder, be an independent contractor.
The Adviser shall not be an agent of the Portfolio.
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 monthly management [fee, payable monthly as
soon as practicable after the] ((fee)) [last day of each
month,]at the annual rate of [.45%] ((0.24%)) of the average
daily net assets of the Portfolio (computed in the manner set forth in
the [Fund's]Declaration of Trust) throughout the month; provided that
[the fee, so computed, shall be reduced by the compensation, including
reimbursement of expenses, paid by the Portfolio to those Trustees who
are not "interested persons" of the Fund or the Adviser. In]
((in)) the case of initiation or termination of this Contract
during any month, the fee ((for that month)) shall be reduced
proportionately ((on)) [based] ((the basis)) [on] ((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.
((4. It is understood that the Portfolio will pay all its expenses,
which expenses payable by the Portfolio 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 Portfolio'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 Portfolio; (viii) all other expenses
incidental to holding meetings of the Portfolio's shareholders,
including proxy solicitations therefor; (ix) a pro rata share, based
on relative net assets of the Portfolio 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 Portfolio is a party and the legal obligation
which the Portfolio may have to indemnify the Fund's Trustees and
officers with respect thereto.))
[4] ((5.)) The services of the Adviser to the Portfolio 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 Portfolio 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 Portfolio or to any shareholder of the Portfolio
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 or other investment
instrument.
((6. Subject to the prior written approval of the Trustees of the
Trust, satisfaction of all applicable requirements under the 1940 Act,
and such other terms and conditions as the Trustees may impose, the
Advi ser may appoint (and may from time to time remove) one or
more unaffiliated persons as agent to perform any or all of the
services specified hereunder and to carry out such provisions of this
Agreement as the Advi se r may from time to time direct ,
and may delegate to such unaffiliated persons the authority vested in
the Advis er pursuant to this Agreement to the extent necessary
to enable such persons to perform the services of such person by the
Advi ser , provided , however, that the appointment of any
such agent shall not relieve the Advi ser of any of its
liabilities hereunder.))
[5.] ((7.)) (a) Subject to prior termination as provided in
sub-paragraph (d) of this paragraph[5.] ((7.)) this Contract
shall continue in force until July 31, [1990]((1998)) 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 Portfolio.
(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 Portfolio.
(c) In addition to the requirements of sub-paragraphs (a) and (b) of
this paragraph [5,]((7,)) 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 Portfolio by vote of a
majority of the outstanding voting securities of the Portfolio. This
Contract shall terminate automatically in the event of its assignment.
[6.] ((8.)) 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
Portfolio and its assets, and the Adviser shall not seek satisfaction
of any such obligation from the shareholders or any shareholder of the
Portfolio or any other Portfolios 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 Portfolio under the Declaration of Trust
are separate and distinct from those of any and all other Portfolios.
((9. This Agreement shall be governed by, and construed in accordance
with, the laws of the Commonwealth of Massachusetts, without giving
effect to the choice of laws provision thereof.))
The terms "vote of a majority of the outstanding voting 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 ((or no action
letters)) 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.
[SIGNATURE LINES OMITTED]
EXHIBIT 2
FORM OF
SUBADVISORY AGREEMENT
This Agreement is entered into as of the ___ day of
_____, 1997, among Fidelity Commonwealth Trust, a
Massachusetts business trust (the "Trust"), on behalf of Spartan
Market Index Fund, a series portfolio of the Trust (the
"Portfolio"), Fidelity Management & Research Company, a Massachusetts
corporation ("Manager"), and Bankers Trust Company, a New York banking
corporation ("Subadviser").
WHEREAS, the Trust, on behalf of the Portfolio, has entered into a
Management Contract, dated _______ __, 1997, with Manager
(the "Management Contract"), pursuant to which Manager has agreed to
provide certain management and administrative services to the
Portfolio; and
WHEREAS, Manager desires to appoint Subadviser as investment
s ubadviser to provide the investment advisory and
administrative services to the Portfolio specified herein, and
Subadviser is willing to serve the Portfolio in such capacity; and
WHEREAS, the trustees of the Trust (the "Trustees"), including a
majority of the Trustees who are not "interested persons" (as such
term is defined below) of any party to this Agreement, and the
shareholder(s) of the Portfolio, have each consented to such an
arrangement;
NOW , THEREFORE, in consideration of the mutual covenants
contained herein, the parties agree as follows:
I. APPOINTMENT OF SUBADVISER; COMPENSATION
1.1 Appointment as Subadviser. Subject to and in accordance
with the provisions hereof, Manager hereby appoints Subadviser as
investment s ubadviser to perform the various investment
advisory and other services to the Portfolio set forth herein and,
subject to the restrictions set forth herein, hereby delegates to
Subadviser the authority vested in Manager pursuant to the Management
Contract to the extent necessary to enable Subadviser to perform its
obligations under this Agreement.
1.2 Scope of Investment Authority. (a) The Subadviser is
hereby authorized, on a discretionary basis, to manage the investments
and determine the composition of the assets of the Portfolio, subject
at all times to (i) the supervision and control of the Trustees, (ii)
the requirements of the Investment Company Act of 1940 and rules
thereunder , as amended from time to time (the "Investment
Company Act") , (iii) the investment objective, policies and
limitations, as provided in the Portfolio's Prospectus and other
governing documents, and (iv) such instructions, policies and
limitations relating to the Portfolio as the Trustees or Manager may
from time to time adopt and communicate in writing to Subadviser.
Notwithstanding anything herein to the contrary, Subadviser is not
authorized to take any action, including the purchase and sale of
portfolio securities, in contravention of any restriction, limitation,
objective, policy or instruction described in the previous sentence.
(b) It is understood and agreed that, for so long as this Agreement
shall remain in effect, Subadviser shall retain discretionary
investment authority over the manner in which the Portfolio's assets
are invested, and Manager shall not have the right to overrule any
investment decision with respect to a particular security made by
Subadviser, provided that the Trustees and Manager shall at all
times have the right to monitor the Portfolio's investment activities
and performance, require Subadviser to make reports and give
explanations as to the manner in which the Portfolio's assets are
being invested, and, should either Manager or the Trustees become
dissatisfied with Subadviser's performance in any way, terminate this
Agreement in accordance with the provisions of Section 9.2 hereof.
1.3 Appointment as Proxy Voting Agent. Subject to and in
accordance with the provisions hereof, the Trustees hereby appoint
Subadviser as the Portfolio's proxy voting agent, and hereby
delegate to Subadviser discretionary authority to vote all proxies
solicited by or with respect to issuers of securities in which the
assets of the Portfolio may be invested from time to time. Upon
written notice to Subadviser, the Trustees may at any time withdraw
the authority granted to Subadviser pursuant to this Section 1.3 to
perform any or all of the proxy voting services contemplated hereby.
1.4 Governing Documents. Manager will provide Subadviser with
copies of (i) the Trust's Declaration of Trust and By-laws, as
currently in effect, (ii) the Portfolio's currently effective
prospectus and statement of additional information, as set forth in
the Trust's registration statement under the Investment Company Act
and the Securities Act of 1933, as amended, (iii) any instructions,
investment policies or other restrictions adopted by the Trustees or
Manager supplemental thereto, and (iv) the Management Contract.
Manager will provide Subadviser with such further documentation and
information concerning the investment objectives, policies and
restrictions applicable to the Portfolio as Subadviser may from time
to time reasonably request.
1.5 Subadviser's Relationship. Notwithstanding anything
herein to the contrary, Subadviser shall be an independent contractor
and will have no authority to act for or represent the Trust, the
Portfolio or Manager in any way or otherwise be deemed an agent of any
of them, except to the extent expressly authorized by this Agreement
or in writing by the Trust or Manager.
1.6 Compensation. Subadviser shall be compensated for the
services it performs on behalf of the Portfolio in accordance with the
terms set forth in Appendix A to this Agreement.
II. SERVICES TO BE PERFORMED BY SUBADVISER
2.1 Investment Advisory Services. (a) In fulfilling its
obligations to manage the assets of the Portfolio, Subadviser will:
(i) formulate and implement a continuous investment program for the
Portfolio, including, without limitation, implementation of a
securities lending program in accordance with the provisions of
Article III hereof;
(ii) take whatever steps are necessary to implement these
investment programs by the purchase and sale of securities and other
investments, including the selection of brokers or dealers, the
placing of orders for such purchases and sales in accordance with the
provisions of paragraph (b) below and assuring that such purchases and
sales are properly settled and cleared;
(iii) provide such reports with respect to the implementation of
the Portfolio's investment program as the Trustees or Manager shall
reasonably request; and
(iv) provide advice and assistance to Manager as to the
determination of the fair value of certain securities where market
quotations are not readily available for purposes of calculating net
asset value of the Portfolio in accordance with valuation procedures
and methods established by the Trustees.
(b) The Subadviser shall place all orders for the purchase and sale
of portfolio securities for the Portfolio's account with brokers and
dealers selected by Subadviser. Such brokers and dealers may include
brokers or dealers that are "affiliated persons" (as such term is
defined in the Investment Company Act) of the Trust, the Portfolio,
Manager or Subadviser, provided that Subadviser shall only
place orders on behalf of the Portfolio with such affiliated persons
in accordance with procedures adopted by the Trustees pursuant to Rule
17e-1 under the Investment Company Act. The Subadviser shall use its
best efforts to seek to execute portfolio transactions at prices which
are advantageous to the Portfolio 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 Portfolio and/or other
accounts over which Subadviser or its affiliates exercise investment
discretion. The Subadviser is authorized to pay a broker or dealer who
provided such brokerage and research services a commission for
executing a portfolio transaction for the Portfolio which is in excess
of the amount of commission another broker or dealer would have
charged for effecting that transaction if Subadviser 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
Subadviser and its affiliates have in respect to accounts over which
they exercise investment discretion. The Trustees shall periodically
review the commissions paid by the Portfolio to determine if the
commissions paid over representative periods were reasonable in
relation to the benefits to the Portfolio.
2.2. Administrative and Other Services. (a) Subadviser will,
at its expense, furnish (i) all necessary investment and management
facilities, including salaries of personnel required for it to execute
its duties faithfully, and (ii) administrative facilities, including
bookkeeping, clerical personnel and equipment necessary for the
efficient conduct of the investment affairs of the Portfolio
(excluding determination of net asset values and shareholder
accounting services).
(b) Subadviser will maintain all accounts, books and records with
respect to the Portfolio as are required of an investment adviser of a
registered investment company pursuant to the Investment Company Act
and the rules thereunder. Subadviser agrees that such records are the
property of the Trust, and will be surrendered to the Trust promptly
upon request. The Manager shall be granted reasonable access to the
records and documents in Subadviser's possession relating to the
Portfolios.
(c) Subadviser shall provide such information as is necessary to
enable Manager to prepare and update the Trust's registration
statement (and any supplement thereto) and the Portfolio's financial
statements. Subadviser understands that the Trust and Manager will
rely on such information in the preparation of the Trust's
registration statement and the Portfolio's financial statements, and
hereby covenants that any such information approved by Subadviser
expressly for use in such registration and/or financial statements
shall be true and complete in all material respects.
(d) Subadviser will vote the Portfolio's investment securities in
the manner in which Subadviser believes to be in the best interests of
the Portfolio, and shall review its proxy voting activities on a
periodic basis with the Trustees.
(e) Subadviser will provide custodian services to the Portfolio in
accordance with the provisions of a separate Custodian Agreement,
dated as of the date hereof, between the Trust, on behalf of the
Portfolio, and Subadviser.
III. SECURITIES LENDING
3.1. Appointment as Agent. For as long as this Agreement
shall remain in effect, Subadviser is hereby authorized as the
Portfolio's agent to lend on a disclosed basis the Portfolio's
securities. Subadviser is further authorized as the Portfolio's agent
to sign agreements with borrowers, ownership or other certificates as
may be required by the Internal Revenue Service or any other tax
authorities, and to take any other actions necessary to effect such
loans.
3.2. Indemnification . (a) In the event that any
securities lending transaction is terminated and the loaned securities
or any portion thereof shall not have been returned to the Portfolio
by or on behalf of the borrower within the time specified by
Subadviser's agreement with the borrower (the "Delivery Date"),
Subadviser shall, at its expense, within one (1) business day after
the Delivery Date replace the loaned securities (or any portion
thereof not so returned) with a like amount of the loaned securities
of the same issuer, class and denomination, and hold the Portfolio,
the Trustees and Manager harmless from any brokerage commission, fees,
taxes or other expenses incurred by Subadviser in the purchase of such
replacement securities. If Subadviser is unable to purchase such
replacement securities on the open market within one business day
after the Delivery Date (the "Reimbursement Date"), Subadviser shall
credit the Portfolio's account by the close of business on the
Reimbursement Date with an amount of cash in U.S. dollars equal to (i)
if the Portfolio shall continue to hold such unreturned loaned
securities, the Market Value (as defined below) of such unreturned
loaned securities determined at the close of business as of the
Reimbursement Date, plus all financial benefits derived from the
beneficial ownership of the unreturned loaned securities which have
accrued on such securities whether or not received from borrower, or
(ii) if the Portfolio shall have sold such securities prior to the
Reimbursement Date, ( A ) the sale proceeds in respect of such
sale, to the extent not received by the Portfolio, plus ( B ) any
interest, penalties, fees or other costs, if any, incurred by the
Portfolio as a direct result of a failure to settle such sale on a
timely basis, provided that such interest, penalties, fees or
other costs shall not include any consequential or special damages
which may arise out of such failure to settle such sale on a timely
basis. The "Market Value" of any securities on any given day shall be
the fair market value of such security on such day, as determined in
accordance with the Portfolio's valuation procedures and methods, as
adopted by the Trustees.
(b) In the event that Subadviser shall be required to make any
payment to the Portfolio or shall incur any loss or expense pursuant
to paragraph (a) above, it shall, to the extent of such payment or
loss or expense, be subrogated to, and succeed to, all of the
Portfolio's rights against the borrower and to the collateral
involved. To the extent the collateral consists of cash or securities
issued or guaranteed by the United States Government or its agencies,
the Portfolio shall contemporaneously with any such payment to the
Portfolio by Subadviser surrender same to Subadviser for its sole
disposition.
(c) Notwithstanding the foregoing, in no event shall Subadviser
incur liability pursuant to paragraph (a) above if Subadviser is
prevented, forbidden or delayed from causing a loaned security to be
returned to the Portfolio by the applicable Delivery Date by reason of
(i) any provision of any present or future law or regulation or order
of the United States of America, or any state thereof, or of any
foreign country, or political subdivision thereof, or of any court of
competent jurisdiction; or (ii) any act of God or war or other similar
circumstance beyond the control of Subadviser unless, in each case,
such delay or nonperformance is caused by (A) the negligence,
misfeasance or misconduct of Subadviser or any of its directors,
officers, employees or agents, or (B) a malfunction or failure of
equipment operated or utilized by Subadviser other than a malfunction
or failure beyond Subadviser's control and which could not have been
reasonably anticipated and/or prevented by Subadviser.
3.3. Market Risk. The Portfolio acknowledges that any cash
collateral provided by a borrower in respect of a securities lending
transaction may be invested by Subadviser on the Portfolio's behalf at
the Portfolio's risk, and if, upon termination of any loan, the cash
collateral held by Subadviser for Portfolio's account is less than the
amount required to be returned to the borrower under Subadviser's
agreement with the borrower, the Portfolio will provide borrower with
cash in the amount of any such deficiency.
3.4. Subadviser's Relationships with Borrowers.The Portfolio
acknowledges that Subadviser or its affiliates may be a creditor of,
for its own account or in a fiduciary capacity, or generally engage in
any kind of commercial or investment banking business with, a
borrower, to whom Subadviser has lent the Portfolio's securities.
Without limiting the generality of the foregoing, Subadviser shall not
be required to disclose to the Portfolio or Manager any financial
information about a borrower obtained in the course of its
relationship with such borrower.
3.5 Securities Lending Procedures. Subadviser's securities
lending activities on behalf of the Portfolio shall be governed by
such procedures as shall be adopted by the Trustees or Manager, as the
same may be amended from time to time.
IV. COMPLIANCE; CONFIDENTIALITY
4.1 Compliance. (a) Subadviser will comply with (i) all
applicable state and federal laws and regulations governing the
performance of the Subadviser's duties hereunder, (ii) the investment
objective, policies and limitations, as provided in the Portfolio's
Prospectus and other governing documents, and (iii) such instructions,
policies and limitations relating to the Portfolio as the Trustees or
Manager may from time to time adopt and communicate in writing to
s ubadviser.
(b) Subadviser will adopt a written code of ethics complying with
the requirements of Rule 17j-1 under the Investment Company Act and
will provide the Trust with a copy of such code of ethics, evidence of
its adoption and copies of any supplemental policies and procedures
implemented to ensure compliance therewith.
4.2 Confidentiality . The parties to this Agreement
agree that each shall treat as confidential all information provided
by a party to the others regarding such party's business and
operations, including without limitation the investment activities or
holdings of the Portfolio. All confidential information provided by a
party hereto shall be used by any other parties hereto solely for the
purposes of rendering services pursuant to this Agreement and, except
as may be required in carrying out the terms of this Agreement, shall
not be disclosed to any third party without the prior consent of such
providing party. The foregoing shall not be applicable to any
information that is publicly available when provided or which
thereafter becomes publicly available other than in contravention of
this Section 4.2 or which is required to be disclosed by any
regulatory authority in the lawful and appropriate exercise of its
jurisdiction over a party, by any auditor of the parties
hereto, by judicial or administrative process or otherwise by
applicable law or regulation.
V. LIABILITY OF SUBADVISER
5.1 Liability; Standard of Care. Notwithstanding anything
herein to the contrary, except as provided in Section 3.2 hereof,
neither Subadviser, nor any of its directors, officers or employees,
shall be liable to Manager or the Trust for any loss resulting from
Subadviser's acts or omissions as Subadviser to the Portfolio, except
to the extent any such losses result from bad faith, willful
misfeasance, reckless disregard or gross negligence on the part of the
Subadviser or any of its directors, officers or employees in the
performance of the Subadviser's duties and obligations under this
Agreement.
5.2 Indemnification. (a) Subadviser agrees to indemnify and
hold the Trust and Manager harmless from any and all direct or
indirect liabilities, losses or damages (including reasonable
attorneys fees) suffered by the Trust or Manager resulting from (i)
Subadviser's breach of its duties hereunder, or (ii) bad faith,
willful misfeasance, reckless disregard or gross negligence on the
part of the Subadviser or any of its directors, officers or employees
in the performance of the Subadviser's duties and obligations under
this Agreement, except to the extent such loss results from the
Trust's or Manager's own willful misfeasance, bad faith, reckless
disregard or negligence in the performance of their respective duties
and obligations under the Management Contract or this Agreement.
(b) Manager hereby agrees to indemnify and hold Subadviser harmless
from any and all direct or indirect liabilities, losses or damages
(including reasonable attorneys fees) suffered by Subadviser resulting
from (i) Manager's breach of its duties under the Management
Contract, or (ii) bad faith, willful misfeasance, reckless disregard
or gross negligence on the part of Manager or any of its directors,
officers or employees in the performance of Manager's duties and
obligations under this Agreement, except to the extent such loss
results from Subadviser's own willful misfeasance, bad faith, reckless
disregard or negligence in the performance of Subadviser's duties and
obligations under this Agreement.
VI. SUPPLEMENTAL ARRANGEMENTS; EXPENSES; INSURANCE
6.1 Supplemental Arrangements. Subject to the prior written
consent of the Trustees and Manager, Subadviser may enter into
arrangements with other persons affiliated with Subadviser to better
fulfill its obligations under this Agreement for the provision of
certain personnel and facilities to Subadviser, provided that such
arrangements do not rise to the level of an advisory contract subject
to the requirements of Section 15 of the Investment Company Act.
6.2 E xpenses. It is understood that the Portfolio will pay
all of its expenses other than those expressly stated to be payable by
Subadviser hereunder or by Manager under the Management Agreement.
Subadviser expressly agrees to pay the cost of all custody services
required by the Portfolio. Expenses paid by the Portfolios will
include, but not be limited to, (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 Trustees other than those who are "interested persons" of the
Trust, Manager or Subadviser; (iv) legal and audit expenses; (v)
registrar and transfer agent fees and expenses; (vi) fees and expenses
related to the registration and qualification of the Trust and the
Portfolio'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 Portfolio; (viii) all other
expenses incidental to holding meetings of the Portfolio's
shareholders, including proxy solicitations therefor; (ix) a pro
rata share based on the relative net assets of the Portfolio and other
registered investment companies having Advisory and Service or
Management Contracts with the Manager, of 50% of insurance premiums
for fidelity bond and other coverage ; (x) investment management
fees; (xi) expenses of typesetting for printing P rospectuses
and S tatements of A dditional I nformation and
supplements thereto; (xii) expenses of printing and mailing
P rospectuses and S tatements of A dditional
I nformation 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 Portfolio is a party and any legal obligation
that the Portfolio may have to indemnify the Trustees, officers and/or
employees or agents with respect thereto. Subadviser shall not cause
the Trust or the Portfolios to incur any expenses, other than those
reasonably necessary for Subadviser to fulfill its obligations under
this Agreement, unless Subadviser has first notified Manager of its
intention to do so.
6.3 Insurance. Subadviser shall maintain for the duration
hereof, with an insurer acceptable to Manager, a blanket bond and
professional liability (errors and omissions) insurance in amounts
reasonably acceptable to Manager. Subadviser agrees that such
insurance shall be considered primary and Subadviser shall assure that
such policies pay claims prior to similar policies that may be
maintained by Manager. In the event Subadviser fails to have in force
such insurance, that failure will not exclude Subadviser's
responsibility to pay up to the limit Subadviser would have had to pay
had said insurance been in force.
VII. CONFLICTS OF INTEREST
7.1 Conflicts of Interest. It is understood that the
Trustees, officers, agents and shareholders of the Trust are or may be
interested in Subadviser as directors, officers, stockholders or
otherwise; that directors, officers, agents and stockholders of
Subadviser are or may be interested in the Trust as trustees,
officers, shareholders or otherwise; that Subadviser may be interested
in the Trust; and that the existence of any such dual interest shall
not affect the validity of this Agreement or of any transactions
hereunder except as otherwise provided in the Trust's Declaration of
Trust and the Articles of Incorporation of Subadviser, respectively,
or by specific provisions of applicable law.
VIII. REGULATION
8.1 Regulation . Subadviser shall submit to all
regulatory and administrative bodies having jurisdiction over the
services provided pursuant to this Agreement any information, reports
or other material which any such body by reason of this Agreement may
reasonably request or require pursuant to applicable laws and
regulations.
IX. DURATION AND TERMINATION OF AGREEMENT
9.1 Effective Date; Duration; Continuance. (a) This Agreement
shall become effective on _________ , 1997.
(b) Subject to prior termination pursuant to Section 9.2 below, this
Agreement shall continue in force until July 31, 1998, 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 or by a vote of a majority of the outstanding voting
securities of the Portfolio, provided that in either event such
continuance shall also be approved by the vote of a majority of the
Trustees who are not "interested persons" (as such term is defined in
the Investment Company Act) of any party to this Agreement cast in
person at a meeting called for the purpose of voting on such approval.
(c) S hareholder approval of this Agreement or any continuance
of this Agreement , if required, shall be effective with respect
to the Portfolio if a majority of the outstanding voting securities of
the series (as defined in Rule 18f-2(h) under the Investment Company
Act) of shares of the Portfolio votes to approve this Agreement or its
continuance.
9.2 Termination and Assignment. This Agreement may be
terminated at any time, upon sixty days' written notice, without the
payment of any penalty, (i) by the Trustees, (ii) by the vote of a
majority of the outstanding voting securities of the Portfolio; (iii)
by Manager, or (iv) by Subadviser.
(b) This Agreement will terminate automatically, without the payment
of any penalty, (i) in the event of its assignment (as defined in the
Investment Company Act) or (ii) in the event the Management Contract
is terminated for any reason.
9.3 Definitions. The terms "registered investment
company," "vote of a majority of the outstanding voting securities,"
"assignment," and "interested persons," when used herein, shall have
the respective meanings specified in the Investment Company Act as now
in effect or as hereafter amended , and subject to such orders or
no-action letters as may be granted by the Securities and Exchange
Commission .
X. REPRESENTATIONS, WARRANTIES AND COVENANTS
10.1 Representations of the Portfolio. The Trust, on
behalf of the Portfolio, represents and warrants that:
(i) the Trust is a business trust established pursuant to the laws
of the Commonwealth of Massachusetts;
(ii) the Trust is duly registered as an investment company under
the Investment Company Act and the Portfolio is a duly constituted
series portfolio thereof;
(iii) the execution, delivery and performance of this Agreement are
within the Trust's powers, have been and remain duly authorized by all
necessary action (including without limitation all necessary approvals
and other actions required under the Investment Company Act) and will
not violate or constitute a default under any applicable law or
regulation or of any decree, order, judgment, agreement or instrument
binding on the Trust or the Portfolio;
(iv) no consent (including, but not limited to, exchange control
consents) of any applicable governmental authority or body is
necessary, except for such consents as have been obtained and are in
full force and effect, and all conditions of which have been duly
complied with; and
(v) this Agreement constitutes a legal, valid and binding
obligation enforceable against the Trust and the Portfolio in
accordance with its terms.
10.2 Representations of the Manager. The Manager represents, warrants
and agrees that:
(i) Manager is a corporation established pursuant to the laws of
the Commonwealth of Massachusetts;
(ii) Manager is duly registered as an "investment adviser" under
the Investment Advisers Act of 1940 ("Advisers Act");
(iii) Manager has been duly appointed by the Trustees and
Shareholders of the Portfolio to provide investment services to the
Portfolio as contemplated by the Management Contract ;
(iv) the execution, delivery and performance of this Agreement are
within Manager's powers, have been and remain duly authorized by all
necessary corporate action and will not violate or constitute a
default under any applicable law or regulation or of any decree,
order, judgment, agreement or instrument binding on Manager;
(v) no consent (including, but not limited to, exchange control
consents) of any applicable governmental authority or body is
necessary, except for such consents as have been obtained and are in
full force and effect, and all conditions of which have been duly
complied with; and
(vi) this Agreement constitutes a legal, valid and binding
obligation enforceable against Manager.
10.3 Representations of Subadviser. Subadviser represents, warrants
and agrees that:
(i) Subadviser is a New York banking corporation established
pursuant to the laws of the State of New York;
(ii) Subadviser is duly registered as an "investment adviser" under
the Advisers Act; or is a "bank" as defined in Section 202 (a) (2) of
the Advisers Act or an "insurance company" as defined in Section 202
(a) (2) of the Advisers Act.
(iii) the execution, delivery and performance of this Agreement are
within Subadviser's powers, have been and remain duly authorized by
all necessary corporate action and will not violate or constitute a
default under any applicable law or regulation or of any decree,
order, judgment, agreement or instrument binding on Subadviser;
(iv) no consent (including, but not limited to, exchange control
consents) of any applicable governmental authority or body is
necessary, except for such consents as have been obtained and are in
full force and effect, and all conditions of which have been duly
complied with; and
(v) this Agreement constitutes a legal, valid and binding
obligation enforceable against Subadviser.
10.4 Covenants of Subadviser. (a) Subadviser will promptly notify the
Trust and Manager in writing of the occurrence of any event which
could have a material impact on the performance of its obligations
pursuant to this Agreement, including without limitation:
(i) the occurrence of any event which could disqualify Subadviser
from serving as an investment adviser of a registered investment
company pursuant to Section 9 (a) of the Investment Company Act or
otherwise;
(ii) any material change in the Subadviser's overall business
activities that may have a material adverse affect on the Subadviser's
ability to perform under its obligations under this Agreement;
(iii) any event that would constitute a change in control of
Subadviser;
(iv) any change in the portfolio manager of the Portfolio; and
(v) the existence of any pending or threatened audit,
investigation, complaint, examination or other inquiry (other than
routine regulatory examinations or inspections) relating to the
Portfolio conducted by any state or federal governmental regulatory
authority.
(b) Subadviser agrees that it will promptly supply Manager with
copies of any material changes to any of the documents provided by
Subadviser pursuant to Section 4.1.
XI. MISCELLANEOUS PROVISIONS
11.1 Use of Subadviser's Name. Neither the Trust nor Manager will use
the name of Subadviser, or any affiliate of Subadviser, in any
prospectus, advertisement sales literature or other communication to
the public except in accordance with such policies and procedures
as shall be mutually agreed to in writing by the Subadviser and the
Manager.
11.2 Use of Trust or Manager's Name. Subadviser will not use the name
of Manager, the Trust or the Portfolio in any prospectus,
advertisement, sales literature or other communication to the public
except in accordance with such policies and procedures as shall be
mutually agreed to in writing by the Subadviser and the Manager.
11.3 Amendments. This Agreement may only be amended with the prior
written consent of each of the parties hereto and if such amendment is
specifically approved (i) by the vote of a majority of the outstanding
voting securities of the Portfolio, and (ii) by the vote of a majority
of the Trustees who are not interested persons (as such term is
defined in the Investment Company Act) of any person to this Agreement
cast in person at a meeting called for the purpose of voting on such
approval. The required shareholder approval shall be effective with
respect to the Portfolio if a majority of the outstanding voting
securities of the Portfolio vote to approve the amendment.
11.4 Entire Agreement. This Agreement contains the entire
understanding and agreement of the parties with respect to the subject
hereof.
11.5 Captions. The headings in the sections of this Agreement are
inserted for convenience of reference only and shall not constitute a
part of the Agreement.
11.6 Notices. All notices required to be given pursuant to this
Agreement shall be delivered or mailed to the last known business
address of the Trust, Manager or Subadviser, as the case may be, in
person or by registered mail or a private mail or delivery service
providing the sender with notice of receipt. Notice shall be deemed
given on the date delivered or mailed in accordance with this Section
11.6.
11.7 Severability. Should any portion of this Agreement, for any
reason, be held to be void at law or in equity, the Agreement shall be
construed, insofar as is possible, as if such portion had never been
contained herein.
11.8 Governing Law. The provisions of this Agreement shall be
construed and interpreted in accordance with the laws of the
Commonwealth of Massachusetts (without giving effect to the choice of
law provisions thereof), or any of the applicable provisions of the
Investment Company Act. To the extent that the laws of the
Commonwealth of Massachusetts, or any of the provisions in this
Agreement, conflict with applicable provisions of the Investment
Company Act, the latter shall control.
11.9 Limitation of Liability. A copy of the Declaration of
Trust establishing the Trust, dated June 16, 1994 , a copy of
which, together with all amendments, is on file in the office of the
Secretary of the Commonwealth of Massachusetts, and notice is hereby
given that this Agreement is not executed on behalf of any of the
Trustees as individuals and no Trustee, shareholder, officer, employee
or agent of the Trust shall be held to any personal liability, nor
shall resort be had to their private property, for the satisfaction of
any obligation or claim, in connection with the affairs of the Trust
or the Portfolio, but only the assets belonging to the Portfolio shall
be liable.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed under seal by their duly authorized officers as of the
date first mentioned above.
[SIGNATURE LINES OMITTED]
APPENDIX A
Pursuant to Section 1.6 of the Subadvisory Agreement among
Fidelity Commonwealth Trust (the "Trust"), on behalf of
Spartan Market Index Fund (the "Portfolio"), Fidelity
Management & Research Company ("Manager") and Bankers Trust Company
(" Subadviser "), Subadviser shall be compensated for the
services it performs on behalf of the Portfolio as follows:
1. Fees Payable by Manager. Manager will pay Subadviser a monthly fee
computed at an annual rate of 0.0 06% (0.6 basis points) of the
average daily net assets of the Portfolio (computed in the manner set
forth in the Trust's Declaration of Trust) throughout the month.
Subadviser 's fee shall be computed monthly, and within twelve
business days of the end of each calendar month, Manager shall
transmit to Subadviser the fee for the previous month. Payment
shall be made in federal funds wired to a bank account designated by
Subadviser . If this Agreement becomes effective or terminates
before the end of any month, the fee (if any) for the period from the
effective date to the end of such month or from the beginning of such
month to the date of termination, as the case may be, shall be
prorated according to the proportion which such period bears to the
full month in which such effectiveness or termination occurs.
Subadviser agrees to look exclusively to Manager, and not to
any assets of the Trust or the Portfolio, for the payment of
Subadviser 's fees arising under this Paragraph 1.
2. Fees Payable by Trust. The Trust, on behalf of the Portfolio,
shall pay Subadviser a monthly fee equal to 40% of the Portfolio's
aggregate Net Securities Lending Income (as defined below)
attributable to the securities lending activities conducted by
Subadviser on the Portfolio's behalf. For purposes of this Paragraph
2, the Portfolio's aggregate "Net Securities Lending Income" for any
given month shall be calculated in accordance with the following
provisions:
(a) Loans Collateralized by Cash. For securities lending
transactions collateralized by cash, the Portfolio's aggregate Net
Securities Lending Income attributable to such transactions for such
month shall be equal to (i) the income earned by the Portfolio from
investing such cash collateral during such month, plus (ii) if such
cash collateral is invested in a money market fund or similar
investment vehicle managed by Subadviser or its affiliates, an amount
equal to the Portfolio's pro rata share (calculated by dividing the
average daily amount of the Portfolio's cash collateral so invested
during such month by the average daily net assets of such investment
vehicle for such month) of the Total Operating Expenses (as defined
below) accrued by such investment vehicle in respect of such month,
less (iii) any rebates, commissions or similar fees paid by the
Portfolio in respect of such transactions during such month. For
purposes of this subparagraph 2(a), an investment vehicle's "Total
Operating Expenses" shall consist of "Management Fees," "Rule 12b-1
Fees," and "Other Expenses," as such terms are defined in paragraphs
8, 9, and 10, respectively, of the instructions to Part A, Item 2 of
the form of registration statement promulgated by the Securities and
Exchange Commission on Form N-1A, as the same may be amended from time
to time.
(b) Loans Collateralized by Securities. For securities lending
transactions collateralized by securities or a letter of credit, the
Portfolio's aggregate Net Securities Lending Income attributable to
such transactions for such month shall be equal to (i) the securities
lending fees paid by the borrower to the Portfolio in respect of such
transactions, less (ii) any rebates, commissions or similar fees paid
by the Portfolio in respect of such transactions.
(c) Substitute Payments. Substitute payments received by the
Portfolio from a borrower in lieu of any dividends, distributions or
other financial benefits paid out in respect of a loaned security
shall not be considered part of the Portfolio's Net Securities Lending
Income for purposes of calculating the fee payable by the Portfolio
pursuant to this Paragraph 2, except that (i) to the extent that any
such substitute payment exceeds the amount that the Portfolio would
have received had such security not been loaned to the borrower, the
Portfolio's Net Securities Lending Income shall be increased by an
amount equal to the difference, and (ii) to the extent that any such
substitute payment is less than the amount that the Portfolio would
have received had such security not been loaned to the borrower, the
Portfolio's Net Securities Lending Income shall be decreased by an
amount equal to the difference .
The fees payable by the Portfolio pursuant to this Paragraph 2 shall
accrue daily and shall be paid to Subadviser monthly within
twelve business days of the end of each calendar month. If the
Portfolio's aggregate Net Securities Lending Income for any calendar
month shall be a negative amount, the fee payable by the Portfolio for
such month pursuant to this Paragraph 2 shall be zero, and an amount
equal to 40% of such negative Net Securities Lending Income shall be
carried forward and applied against future fees earned by
Subadviser pursuant to this Paragraph 2 for a period not to
exceed 3 calendar months.
Subadviser agrees to look exclusively to the assets of the
Portfolio, and not to any other assets of the Trust or Manager, for
the payment of Subadviser 's fees arising under this Paragraph
2.
EXHIBIT 3
BANKERS TRUST COMPANY - DIRECTORS
<TABLE>
<CAPTION>
<S> <C> <C>
Name Principal Occupation Business Address
Lee A. Ault III Director of Various Bankers Trust Company
Corporations c/o Office of the Secretary
130 Liberty Street, MS2310
New York, NY 10006
Neil R. Austrian Director; formerly Bankers Trust Company
Director of Alex. c/o Office of the Secretary
Brown; President and 130 Liberty Street, MS2310
Chief Operating Officer New York, NY 10006
of the National
Football League
George B. Beitzel Director of Various 29 King Street
Corporations Chappaqua, NY 10514-3432
Phillip A. Griffiths Director, Institute for Institute for Advanced Study
Advanced Study Olden Lane
Princeton, NJ 08540
William R. Howell Chairman Emeritus, J.C. Penney Company, Inc.
J.C. Penney Company, P.O. Box 10001
Inc. Plano, TX 753001-0001
Vernon E. Jordan, Jr. Senior Partner, Akin, Akin, Gump, Strauss, Hauer &
Gump, Strauss, Hauer Feld, LLP
& Feld, LLP 1333 New Hampshire Ave.
NW
Suite 400
Washington, DC 20036
A. B. Krongard Vice Chairman of the Bankers Trust Company
Board of Directors of c/o Office of the Secretary
Bankers Trust 130 Liberty Street, MS2310
Company and Bankers New York, NY 10006
Trust New York
Corporation.
Hamish Maxwell Retired Chairman and Philip Morris Companies Inc.
Chief Executive Officer, 100 Park Ave. - 10th Flr.
Philip Morris New York, NY 10017
Companies, Inc.
Frank N. Newman Chairman of the Bankers Trust Company
Board, Chief Executive 130 Liberty Street
Officer and President, New York, NY 10006
Bankers Trust
Company and Bankers
Trust New York
Corporation
N.J. Nicholas Jr. Investor 15 West 53rd Street #34F
New York, NY 10019
Name Principal Occupation Business Address
Russell E. Palmer Chairman and Chief The Palmer Group
Executive Officer, The 3600 Market Street, Suite 530
Palmer Group Philadelphia, PA 19104
Donald L. Staheli Chairman of the Board Bankers Trust Company
and Chief Executive c/o Office of the Secretary
Officer (Retired), 130 Liberty Street, MS2310
Continental Grain New York, NY 10006
Company
Patricia Carry Stewart Former Vice President, Bankers Trust Company
The Edna McConnell c/o Office of the Secretary
Clark Foundation 130 Liberty Street, MS2310
New York, NY 10006
G. Richard Thoman Director; President and Bankers Trust Company
Chief Operating Officer c/o Office of the Secretary
of Xerox Corporation 130 Liberty Street, MS2310
New York, NY 10006
George J. Vojta Vice Chairman of the Bankers Trust Company
Board, Bankers Trust 130 Liberty Street
Company and Bankers New York, NY 10006
Trust New York
Corporation
Paul A. Volcker Director of Various 599 Lexington Avenue
Corporations 40th Floor
New York, NY 10022
</TABLE>
EXHIBIT 4
FUNDS ADVISED BY FMR - TABLE OF AVERAGE NET ASSETS AND EXPENSE
RATIOS (A)
<TABLE>
<CAPTION>
INVESTMENT
FISCAL
AVERAGE
RATIO OF NET
OBJECTIVE AND FUND YEAR END (A) NET ASSETS
ADVISORY FEES
(MILLIONS)(B) TO AVERAGE
NET ASSETS
PAID
TO FMR (C)
<S> <C> <C> <C> <C>
INDEX FUNDS
Variable Insurance Products II:
Index 500 12/31/96 $ 480.5 0.13%*
Spartan U.S. Equity Index 2/28/97 5,035.0 0.01*
Spartan Market Index 4/30/97 1,491.9 0.45
</TABLE>
(a) All fund data are as of the fiscal year end noted in the chart.
(b) Average net assets are computed on the basis of average net
assets of each fund at the close of business on each business day
throughout its fiscal period.
(c) Reflects reductions for any expense reimbursement paid by or
due from FMR pursuant to voluntary or state expense limitations. Funds
so affected are indicated by an (*).
EXHIBIT 4
BANKERS TRUST COMPANY ADVISED/SUB-ADVISED MUTUAL FUNDS
<TABLE>
<CAPTION>
<S> <C> <C>
Fund Assets as of
Advisory Fees
June 30, 1997 Payable to BT (a)
S&P INDEX FUNDS
Equity Index Portfolio (b) $ 2,531,251,100 0.06%*
INCLUDES THE FOLLOWING FEEDER FUNDS:
1,564,477,700
BT Inst'l: Equity 500 Index Fund (c)
BT Pyramid Investment Equity 500
578,288,600
Index (d)
385,840,300
USAA S&P 500 Index (e)
2,644,600
Amer AADV: S&P 500 - AMR Class 0
(f)
Scudder S&P 500 Index (g)
VALIC S&P (Variable Annuity Life
2,544,652,300
0.05% 1st $500mm
Insurance Company) (i) 0.03% over $500mm
PacMut S&P (Pacific Mutual Life
620,980,600
0.07% 1st $100mm
Insurance Company) (i)
0.03% next $100mm
0.01% over $200mm
minimum $20,000
advisory fee
S&P "INDEX BASED" FUND
AARP U.S. Stock Index (j)
23,749,000
0.07% 1st $100mm
0.03% next $100mm
0.01% over $200mm
minimum $75,000
advisory fee; 15%
discount first 12
months
EAFE INDEX FUNDS
BT Inv Port: EAFE Equity Index Portfolio 56,114,100 0.22%*
(b)
INCLUDES THE FOLLOWING FEEDER FUNDS:
54,437,200
BT ADV: EAFE Equity Index Fund -
Inst'l Cl (c)
1,676,800
BT ADV: EAFE Equity Index Fund -
Adv Cl (d)
BT Insur: EAFE Equity Index Fund
0 0.34%*
(Variable Annuity) (h)
Fund Assets as of
Advisory Fees
June 30, 1997 Payable to BT (a)
RUSSELL 2000 INDEX FUNDS
BT Inv Port: Small Cap Index Portfolio (b) $89,471,000 0.10%*
INCLUDES THE FOLLOWING FEEDER FUNDS:
490,500
BT ADV: Small Cap Index Fund -
Adv Cl (d)
66,543,900
BT ADV: Small Cap Index Fund -
Inst'l Cl (c)
BT Insur: Small Cap Index Fund
0 0.22%*
(Variable Annuity) (h)
</TABLE>
(a) Reflects reductions for any expense reimbursement paid by or
due from the pursuant to expense limitations. Funds so affected are
indicated by an (*).
(b) Master portfolio not available for direct retail purchase
(c) Feeder fund available to institutional investors through BT
(d) Feeder fund available to retail investors through BT
(e) Feeder fund available to customers of United States Automobile
Association and retail public
(f) Feeder fund available to customers of American Airlines
(g) Feeder fund available to customers of Scudder, Stevens & Clark;
commenced operations on August 29, 1997
(h) Available only through variable annuity products; the EAFE
Equity Index Fund and Small Cap Index Fund of the BT Insurance Funds
Trust commenced operations on August 22, 1997
(i) Available only through variable annuity products
(j) Sub-advised fund available to members of American Association
of Retired Persons
FMI-PXS-0997 CUSIP#315912204/FUND#317
Vote this proxy card TODAY! Your prompt response will
save the expense of additional mailings.
Return the proxy card in the enclosed envelope or mail to:
FIDELITY INVESTMENTS
Proxy Department
P.O. Box 9107
Hingham, MA 02043-9848
PLEASE DETACH AT PERFORATION BEFORE MAILING.
- ---------------------------------------------------------------------
- -------------------------
FIDELITY COMMONWEALTH TRUST: SPARTAN(registered trademark) MARKET
INDEX FUND
PROXY SOLICITED BY THE TRUSTEES
The undersigned, revoking previous proxies, hereby appoint(s) Edward
C. Johnson 3d, Arthur S. Loring, and Ralph F. Cox, or any one or more
of them, attorneys, with full power of substitution, to vote all
shares of Spartan Market Index Fund which the undersigned is entitled
to vote at the Special Meeting of Shareholders of the fund to be held
at the office of the trust at 82 Devonshire St., Boston, MA 02109, on
November 19, 1997 at 10:00 a.m. and at any adjournments thereof. All
powers may be exercised by a majority of said proxy holders or
substitutes voting or acting or, if only one votes and acts, then by
that one. This Proxy shall be voted on the proposals described in the
Proxy Statement as specified on the reverse side. Receipt of the
Notice of the Meeting and the accompanying Proxy Statement is hereby
acknowledged.
Date _____________, 1997
NOTE: Please sign exactly as your name appears on this Proxy. When
signing in a fiduciary capacity, such as executor, administrator,
trustee, attorney, guardian, etc., please so indicate. Corporate and
partnership proxies should be signed by an authorized person
indicating the person's title.
_______________________________________
_______________________________________
Signature(s) (Title(s), if applicable)
PLEASE SIGN, DATE, AND RETURN
PROMPTLY IN ENCLOSED ENVELOPE
cusip # 315912204/fund# 317
Please refer to the Proxy Statement discussion of each of these
matters.
IF NO SPECIFICATION IS MADE, THE PROXY SHALL BE VOTED FOR THE
PROPOSALS.
As to any other matter, said attorneys shall vote in accordance with
their best judgment.
THE BOARD OF TRUSTEES RECOMMENDS A VOTE FOR EACH OF THE FOLLOWING:
- ---------------------------------------------------------------------
- -------------------------
_____________________________________________________________________
________________________
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
1(a). To approve an amended management contract for the FOR [ ] AGAINST [ ] ABSTAIN [ ] 1(a).
fund.
1(b). To approve a new sub-advisory agreement for the FOR [ ] AGAINST [ ] ABSTAIN [ ] 1(b).
fund.
2. To amend the fund's fundamental investment FOR [ ] AGAINST [ ] ABSTAIN [ ] 2.
limitation concerning diversification to exclude
securities of other investment companies from the
limitation.
</TABLE>
SMI-PXC-0997 cusip # 315912204/fund# 317
IMPORTANT
PROXY MATERIALS
PLEASE CAST YOUR VOTE NOW!
SPARTAN(Registered trademark) MARKET INDEX FUND
Dear Shareholder:
I am writing to let you know that a special shareholder meeting of
Spartan Market Index Fund will be held in November. The purpose of
the meeting is to vote on several important proposals that affect the
fund and your investment in it. As a shareholder, you have the
opportunity to voice your opinion on the matters that affect your
fund. This package contains information about the proposals and the
materials to use when voting by mail.
Please read the enclosed materials and cast your vote on the proxy
card. PLEASE VOTE AND RETURN YOUR CARD PROMPTLY. YOUR VOTE IS
EXTREMELY IMPORTANT, NO MATTER HOW LARGE OR SMALL YOUR HOLDINGS MAY
BE.
All of the proposals have been carefully reviewed by the Board of
Trustees. The Trustees, most of whom are not affiliated with
Fidelity, are responsible for protecting your interests as a
shareholder. The Trustees believe these proposals are in the best
interest of shareholders. They recommend that you vote for each
proposal.
The following Q&A is provided to assist you in understanding the
proposals. Each of these proposals is described in greater detail in
the enclosed proxy statement.
VOTING BY MAIL IS QUICK AND EASY. EVERYTHING YOU NEED IS ENCLOSED.
To cast your vote, simply complete the proxy card enclosed in this
package. Be sure to sign the card before mailing it in the
postage-paid envelope.
If you have any questions before you vote, please call us at
1-800-544-8888. We'll be glad to help you get your vote in quickly.
Thank you for your participation in this important initiative.
Sincerely,
Edward C. Johnson 3d
President
IMPORTANT INFORMATION TO HELP YOU UNDERSTAND AND VOTE ON THE PROPOSALS
Please read the full text of the enclosed proxy statement. Below is a
brief overview of the proposals found in the proxy statement that are
to be voted on at the special shareholder meeting. If you have any
questions regarding the proposals, please call us at 1-800-544-8888.
We appreciate you placing your trust in Fidelity and look forward to
helping you achieve your financial goals.
WHAT IS BANKERS TRUST (BT) AND WHY IS FIDELITY HIRING A SUB-ADVISOR?
Bankers Trust is a major institutional money manager and one of the
nation's leading managers of index funds with 20 years of experience
in managing investments indexed to the S&P 500 and other indices. BT's
commitment to the specialized area of index account management allows
it to provide index fund portfolio management services at a lower cost
than if Fidelity Management & Research Company (FMR) provided those
services itself. FMR made the proposal as part of its ongoing efforts
to provide services to the fund efficiently and at low cost.
WHAT IS BEING AMENDED IN THE MANAGEMENT CONTRACT?
The proposed amendment modifies the management contract with FMR in
two ways. First, the proposal would allow BT to be appointed as
sub-advisor to the fund. Second, the proposal would modify the
management fee arrangement between the fund and FMR to make it
consistent with the majority of other funds FMR manages.
Under the Present Management Contract, the fund pays FMR an
all-inclusive management fee at an annual rate of 0.45% of average net
assets. Under the Amended Management Contract, the fund would pay
separately for management fees and other operating expenses such as
legal, printing, and transfer agent costs. The management fee would be
0.24% of average net assets.
Fidelity has voluntarily agreed to limit the total operating expenses
of the fund to 0.19% of average net assets through December 31, 1999.
Excluded from the 0.19% limit on total operating expenses are BT's
sub-advisory fees associated with securities lending, which are
estimated at 0.002% of average net assets.
WILL TOTAL OPERATING EXPENSES INCREASE IN THE NEAR TERM?
FMR has voluntarily limited the expenses of the fund to 0.19% of
average net assets through December 31, 1999. The expense cap remains
in place whether or not the proposals are approved. With FMR's
expense cap, Spartan Market Index is one of the lowest cost index
funds in the U.S.
WHAT WILL BE THE ROLES OF FIDELITY AND BANKERS TRUST?
FMR currently serves as the fund's manager. As manager, FMR's duties
include managing the fund's investments and supervising relationships
with other companies that provide the fund with services. Other
Fidelity companies maintain shareholder accounts, provide customer
services, and perform accounting activities.
Under the proposals, FMR would continue to serve as the fund's manager
and investment advisor, but would delegate part of its duties to BT.
As sub-advisor, BT would have day-to-day responsibility for managing
the fund's investments in accordance with its policy of attempting to
duplicate the performance of the S&P 500. BT would also provide
custodial and securities lending services.
WHAT IS THE BENEFIT OF AMENDING THE DIVERSIFICATION LIMITATION?
This proposal would permit the fund to invest without limit in the
securities of other investment companies, including non-publicly
offered money market funds managed by FMR. If this proposal and the
other shareholder proposals are approved, and if BT receives SEC
permission, the fund may invest cash collateral from securities loans
in money market funds managed by BT. If permitted by applicable
regulation, it may also be more efficient for BT to manage the fund's
other cash positions by investing in a BT money market fund. The fund
may invest in a BT money market fund if it is expected to benefit the
fund by reducing costs and/or providing greater returns on temporary
cash investments.
THE PROXY SAYS THAT THE BOARD OF TRUSTEES HAS APPROVED THESE CHANGES.
WHAT ROLE DOES THE BOARD PLAY?
The Trustees oversee the investment policies of each fund. Members of
the Board are fiduciaries and have an obligation to serve the best
interests of each fund's shareholders, including approving policy
changes such as those proposed for your fund. In addition, the
Trustees review fund performance, oversee a fund's activities, and
review contractual arrangements with companies that provide services
to a fund.
HOW MANY VOTES AM I ENTITLED TO CAST?
As a shareholder, you are entitled to one vote for each dollar of net
asset value you own on the record date. The record date is September
22, 1997.
WHAT IF THERE ARE NOT ENOUGH VOTES TO REACH A QUORUM BY THE SCHEDULED
SHAREHOLDER MEETING DATE?
If enough people do not vote, we will need to take further action. We
or outside solicitors may contact you by mail, telephone, facsimile,
or by personal interview to encourage you to vote. All of this is
costly to the funds and is ultimately passed on to shareholders.
Therefore, we encourage shareholders to vote as soon as they review
the enclosed proxy materials to avoid additional mailings, telephone
calls or other solicitations.
HOW DO I VOTE MY SHARES?
You can vote your shares by completing and signing the enclosed proxy
card, and mailing it in the enclosed postage paid envelope. If you
need assistance, or have any questions regarding the proposals, please
call us at 1-800-544-8888.
HOW DO I SIGN THE PROXY CARD?
INDIVIDUAL ACCOUNTS: Shareholders should sign exactly as their names
appear on the account registration shown on the card.
JOINT ACCOUNTS: Either owner may sign, but the name of the person
signing should conform exactly to a name shown in the registration.
ALL OTHER ACCOUNTS: The person signing must indicate his or her
capacity. For example, a trustee for a trust or other entity should
sign, "Ann B. Collins, Trustee."
