Making your cash work harder with Model CD Ladders

September 14th, 2016

Patrick Deignan, SVP Fidelity Capital Markets Roger Young, SVP Fidelity Capital Markets Richard Carter, VP Fidelity Personal Investments

Fidelity Brokerage Services, Member NYSE, SIPC 900 Salem Street, Smithfield, RI 02917 © 2016 FMR LLC. All rights reserved. 716544.2.0

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Agenda

1. A world of low and negative interest rates / a build up of cash

2. Trading-off liquidity for returns

3. Using Model CD Ladders strategically in your portfolio

4. Summary

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A World of Low Rates Benchmark yield curves of major developed countries

-1.0%

-0.5%

0.0%

0.5%

1.0%

1.5%

2.0%

3 month 6 month 2 year 5 year 10 year

U.S.

Italy

France

Japan

Germany

Country

5yr Yields 9/08/16

5yr Yields 2/27/15

5yr Yields 2/27/14

U.S. 1.17% 1.51% 1.50%

U.K. 0.24% 1.20% 1.93%

Italy 0.25% 0.56% 2.11%

Spain 0.12% 0.56% 2.04%

Sweden (0.30%) 0.17% 1.50%

France (0.40%) 0.04% 1.06%

Japan (0.17%) 0.05% 0.19%

Germany (0.50%) (0.09%) 0.70%

Switzerland (0.90%) (0.48%) 0.22%

A

B

Source: Bloomberg Finance L.P., as of 09/08/2016.

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Short and medium-Term CDs provide some of the best value in the high quality bond universe

Note the extra yield from CDs compared to US Treasuries

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

2 year 3 year 5 year 10-year

Intermediate-term Yields

CDs US Treasury Corp AAA

0.0%

0.2%

0.4%

0.6%

0.8%

1.0%

3 month 6 month 9 month 12 month

Short-term Yields

CDs US Treasury Corp AAA

A B

Past performance is no guarantee of future results Source: Bloomberg Finance L.P., as of 09/08/2016.

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Preferences for Cash, Money Market Funds, Treasuries, and CDs

$-

$1,000

$2,000

$3,000

$4,000

$5,000

$6,000

$7,000

$8,000

$9,000

2008 2009 2010 2011 2012 2013 2014 2015 2016

Household Balance Sheets - Adding CDs

Check Deposits and CurrencyMoney Market fund sharesU.S. Treasuries

($B)

Flow Trends U.S. Treasuries

Money Mkt Funds

Deposits

Source: Federal Reserve, Balance Sheet of Households Report, B.100. March 2016 You could lose money by investing in a money market fund. An investment in a money market fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Before investing, always read a money market fund’s prospectus for policies specific to that fund.

$-

$200

$400

$600

$800

$1,000

$1,200

$1,400

$1,600

$1,800

2008 2009 2010 2011 2012 2013 2014 2015 2016

Liquid Holdings of Household Balance Sheets

Check Deposits and CurrencyMoney Market fund sharesU.S. Treasuries

($B)

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Discussing the Cash Trade-Off

Acknowledging the value of cash: Cash represents flexibility. It is liquid and as such can be spent at short notice Cash in the portfolio helps investors remain resilient in the face of volatility

But cash also comes with a cost: Negative “real returns” due to the low yields currently available A risk of over-allocating to riskier assets in order to compensate for no returns on cash

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Using CDs to trade-off Liquidity for Higher Returns CDs can provide enhanced returns from (some of) your cash: Retain a certain amount of liquid cash for immediate spending or opportunistic needs Consider the remainder as a candidate for less liquid CDs

Why CDs?: CDs offer rates of return supported by FDIC insurance Fidelity offers CDs from hundreds of issuers and maturities You can pick CDs that best match your preferred “return of liquidity” timeframes

Cash Flow Time Horizon

Yield Goals

Return trade-offs

For the purposes of FDIC insurance coverage limits, all depository assets of the account holder at the institution issuing the CD will generally be counted toward the aggregate limit (usually $250,000) for each applicable category of account. FDIC insurance does not cover market losses. All the new-issue brokered CDs Fidelity offers are FDIC insured. In some cases, CDs may be purchased on the secondary market at a price that reflects a premium to their principal value. This premium is ineligible for FDIC insurance. For details on FDIC insurance limits, visit FDIC.gov.

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Introducing Fidelity’s Model CD Ladders

Now available on Fidelity.com: Research > Fixed Income, Bonds & CDs

Fidelity presents three Model CD Ladders: 1-Year, 2-Year, and 5-Year Model CD Ladders as a “Buy & Hold” concept, not a trading strategy

Screenshots are for illustrative purposes

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An Easy 3-Step Process

1) Select the CD Ladder you would like to build

Screenshots are for illustrative purposes

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An Easy 3-Step Process

2) Choose the Account and Amount

100,000

Screenshots are for illustrative purposes

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An Easy 3-Step Process

3) Review the results, edit if desired

Screenshots are for illustrative purposes

A B

C

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Fine-tuning your CD Ladder

Screenshots are for illustrative purposes

To choose a different CD, click the CD you wish to purchase and click “Replace”

A

B

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Ensure your CD ladder is suitable based on your investment objective and time horizon

Screenshots are for illustrative purposes

A

B

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Next Steps – Supporting your knowledge and actions

Online Resources Contact Us

Visit: Fidelity.com > Research > Fixed Income, Bonds & CDs

Carousel P.1 – CD Ladders Video

Carousel P.2 – CD Viewpoint

Live help on finding bonds and navigating the fixed income pages

Complimentary Fixed Income Analysis on bond holdings held here or outside

Call: 1-800-544-5372

Visit: Fidelity.com > Research > Fixed Income, Bonds & CDs

“Service & Solutions” tab

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Summary – It’s time to look at CD Ladders

1. Brokered CDs offer the potential to earn a FDIC-insured yield in a world of low and negative interest rates.

2. Investors should always balance the pros / cons of liquid instruments such as cash compared to less-liquid options, such as our laddered CD strategies to weigh the trade-offs.

3. Fidelity’s Model CD Ladders are a simple and easy way to help you build a ladder strategy with varying maturity dates.

4. Fidelity’s new issue brokered CD offering provides CDs of multiple maturity dates, from dozens of different issuing banks, all without a charge to purchase or management fees.

Fidelity makes new-issue CDs available without a separate transaction fee. Fidelity Brokerage Services LLC and National Financial Services LLC receive compensation for participating in the offering as a selling group member or underwriter.

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References to individual securities are for illustrative purposes only, and should not be construed as investment advice. Brokered CDs sold or redeemed prior to maturity may be subject to loss. Your ability to sell a CD on the secondary market is subject to market conditions. The secondary market for CDs may be limited. If your CD has a step rate, the interest rate of your CD may be higher or lower than prevailing market rates. The initial rate on a step rate CD is not the yield to maturity. If your CD has a call provision, which many step rate CDs do, please be aware the decision to call the CD is at the issuer's sole discretion. Also, if the issuer calls the CD, you may be confronted with a less favorable interest rate at which to reinvest your funds. Fidelity makes no judgment as to the credit worthiness of the issuing institution. For the purposes of FDIC insurance coverage limits, all depository assets of the account holder at the institution that issued the CD will generally be counted toward the aggregate limit (usually $250,000) for each applicable category of account. FDIC insurance does not cover market losses. In some cases, CDs may be purchased on the secondary market at a price that reflects a premium to their principal value. This premium is ineligible for FDIC insurance. For details on FDIC insurance limits, see www.fdic.gov A CD ladder, depending on the types and amount of securities within it, may not ensure adequate diversification of your investment portfolio. While diversification does not ensure a profit or guarantee against loss, a lack of diversification may result in heightened volatility of your portfolio value. You must perform your own evaluation as to whether a CD ladder and the securities held within it are consistent with your investment objectives, risk tolerance, and financial circumstances. To learn more about diversification and its effects on your portfolio, contact a representative. CD Model Ladders are provided for educational purposes and are not intended to serve as the primary basis for your investment, financial or tax planning decisions. The results of the tool are based on your inputs and criteria and the tool's stated methodology.

Important information Thank You

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Appendix

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What is Fidelity’s CD Offering?

1. At any point in time, Fidelity typically offers over 100 new issue CDs from 20-50 different banks

2. In 2014 Fidelity offered new issue CDs from over 500 different banks

3. All Fidelity’s new issue CD offerings are: o Priced at par o Minimum $1000 investment o FDIC insured o No charge to invest*

4. Open for orders 24/7

Fidelity Account

CD Issuers

Customer

$10,000 $5,000

$25,000

Brokered CDs at Fidelity

* Fidelity makes new issue CDs available without a separate transaction fee. Fidelity Brokerage Services LLC and National Financial Services LLC receive compensation for participating in the offering as a selling group member or underwriter

For the purposes of FDIC insurance coverage limits, all depository assets of the account holder at the institution that issued the CD will generally be counted toward the aggregate limit (usually $250,000) for each applicable category of account. FDIC insurance does not cover market losses. In some cases, CDs may be purchased on the secondary market at a price that reflects a premium to their principal value. This premium is ineligible for FDIC insurance. For details on FDIC insurance limits, see www.fdic.gov

.

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Appendix: Fidelity’s AutoRoll Program

Source: Fidelity.com

Screenshots are for illustrative purposes

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Appendix: CD Weekly Alerts

Source: Fidelity.com

Screenshots are for illustrative purposes