Transcript Document

Capital Markets Review
►
Dated October 31, 2008
NOT FDIC INSURED  MAY LOSE VALUE  NO BANK GUARANTEE
Produced by FIIS Investment Consulting Services
For Investors
Globalization and the Interdependence of Global
Economies : The Virtuous Cycle
Commodity Based
Economies
(e.g. Brazil, Canada, Russia)
“Machine Tool” Economies
(e.g. Japan, Germany)
Factories need to be built
and supplied
China
India
Emerging
Asia
Consumer Goods are increasingly
imported
US Consumer
Houses acted as an ATM for
the consumer
Proceeds flow back into
the US Bond market
US Housing Market
Low interest rates support the
housing market
US Bond Market
2
Two Vicious Cycles
Financials
Consumer
Reduced
Availability
of Credit
Lay-Offs
Deleveraging
Balance
Sheets
Reduced Revenues
of Consumer
Oriented Businesses
Falling
Housing
Prices
Loan
Portfolio
Losses
Reduced
Consumer
Spending
3
Government Actions to Stem Financial and Housing
Crisis
Liquidity & Crisis Aversion
Support for Homeowners
& Consumers
Re-capitalization of
Financial System
Fed auction facilities
Tax rebate ($100 B)
Troubled Asset Relief
Program (TARP)
Fed repo programs
FHA expansion
Direct Injection of Equity
Fed discount window access
GSE expansion & assistance
Bear Stearns financing
Voluntary rate freeze plan
AIG takeover
Other housing provisions
Foreign Exchange Swaps
Guarantee of MMarket
Funds
Quantitative Easing
Fed rate cuts
GSE Conservatorship
LEGEND
Direct
Indirect
Source: FMRCo (MARE) as of 9/30/08.
4
World responding!
Monetary Policy
July 2008
Monetary Policy
September 2008
Neutral
Neutral
Euro-zone
Tightening
Neutral
China
Tightening
Easing
Australia
Neutral
Easing
Taiwan
Neutral
Easing
Czech Republic
Neutral
Easing
United States
Source: FMRCo (MARE) as of 9/30/08.
5
Federal Reserve Balance Sheet
6
U.S Financial Landscape Changed Forever
GSEs
Insurance
Retail
Banks
Investment
Banks
Institution Name
Q3 Event
Fannie Mae
Government seizure
Freddie Mac
Government seizure
American International Group
Government seizure
IndyMac Bank
Bankruptcy
Washington Mutual
Bankruptcy & sold to JPMorgan
Wachovia
Government intervened; sold*
Lehman Brothers
Bankruptcy
Merrill Lynch
Acquired by Bank of America
Morgan Stanley
Converted to bank holding company
Goldman Sachs
Converted to bank holding company
*Initial announcement during Q3 was planned sale to Citigroup; subsequent to quarter-end, sold to Wells Fargo, and Citigroup contested the sale via litigation.
Source: FMRCo (MARE) as of 10/3/08.
7
8
TED Spread – Proxy for Bank Risk Aversion
TED Spread
5%
4%
3%
2.00 2%
1%
0%
'90
'92
'94
'96
'98
'00
'02
'04
3 Month LIBOR minus 3 Month T-Bill 11/7/2008
Average TED Spread
Source: Factset
'06
'08
-1%
9
Borrowers and Lenders - Liquidity
Source: Federal Reserve Board, Haver Analytics, FMRCo (MARE) as of 9/30/08.
10
US Housing: The Long Road Back
Home Prices and Inflation (Indexed to 100)
350
300
250
200
150
100
'90
'92
'94
'96
'98
'00
'02
US House Prices, S&P Case-Shiller 8/29/2008
CPI 9/30/2008
Source: Factset
'04
'06
'08
50
11
US Housing: The Long Road Back
25%
12
20%
11
15%
10
9.40
10%
9
5%
8
0%
7
-5%
6
-10%
5
-15%
4
-20%
-17.72
'00
'02
'04
'06
'08
Change in Home Prices, Year over Year (Left Axis) 8/29/2008
Months Supply of Homes on the Market (Right Axis) 9/30/2008
Source: Factset
Months Supply
US Housing
3
12
The Consumer: Real Spending is Particularly Weak
Consumer Spending (PCE)
10%
2008
Stimulus
Checks
8%
6%
3.78
4%
2%
-0.39
'99
'00
'01
'02
'03
'04
'05
'06
'07
'08
0%
-2%
YOY Change in Personal Outlays 9/30/2008
YOY Change in Real Personal Outlays 9/30/2008
Recession Periods - United States
Source: Factset
13
Employment: Recession Levels
Employment
600
200
0
-240.00
'86 '88 '90 '92 '94 '96 '98 '00
Nonfarm Payrolls 10/31/2008
Recession Periods - United States
Source: Factset
'02
'04
'06
'08
Thousands
400
-200
-400
14
Inflation: Problematic at Current Levels
Fed is Banking on Economic Drag
CPI & PPI
12%
10%
8.68
8%
6%
4.94
4%
2%
0%
-2%
'84 '86 '88 '90 '92 '94 '96 '98 '00 '02 '04 '06 '08
-4%
YOY Change in Consumer Price Index - All Items 9/30/2008
YOY Change in Producer Price Index 9/30/2008
Source: Factset
15
NBER Key Recession Indicators
10%
10%
5%
5%
0%
0%
-5%
'89 '91 '93 '95 '97 '99 '01 '03 '05 '07
-10%
YOY Change in Industrial Production 9/30/2008
Recession Periods - United States
'89 '91 '93 '95 '97 '99 '01 '03 '05 '07
-5%
YOY Change in Personal Income 9/30/2008
Recession Periods - United States
10%
4%
3%
5%
2%
0%
1%
0%
-5%
-1%
'89 '91 '93 '95 '97 '99 '01 '03 '05 '07
YOY Change in Manufacturing and Trade Sales 9/30/2008
Recession Periods - United States
Source: Factset
-10%
'89 '91 '93 '95 '97 '99 '01 '03 '05 '07
-2%
YOY Change in Non-Farm Payrolls 10/31/2008
Recession Periods - United States
16
“History doesn’t always repeat itself, but it does
rhyme” Mark Twain
17
Stock Market: Worst-Performing 10-year Periods
Have Preceded Vastly Better Returns
S&P 500 Average Annual 10-Year Performance
(1935-2008)
25
20
Total Return (%)
15
10
5
0
-5
Dec-07
Dec-03
Dec-99
Dec-95
Dec-91
Dec-87
Dec-83
Dec-79
Dec-75
Dec-71
Dec-67
Dec-63
Dec-59
Dec-55
Dec-51
Dec-47
Dec-43
Dec-39
Dec-35
-10
Source: Ibbotson, FMRCo (MARE) as of 9/30/2008. Past performance is no guarantee of future results.
You cannot invest directly in an index. Please refer to the appendix for important index information.
18
Fleeing to Safety Can Be Costly For Long-Term
Investors
S&P 500, Money Markets Assets % of All Mutual Fund Assets
(1998-2008)
1,600
Money Market Assets % of All S&P 500 Index Level
Mutual Fund Assets
1,500
1,400
1,300
1,200
1,100
Peaks in moneymarket ownership
coincided with the
stock market trough
1,000
900
800
Money Markets % of All Mutual Funds
S&P 500 Index
700
35%
Jul-08
Jan-08
Jul-07
Jan-07
Jul-06
Jan-06
Jul-05
Jan-05
Jul-04
Jan-04
Jul-03
Jan-03
Jul-02
Jan-02
Jul-01
Jan-01
Jul-00
Jan-00
Jul-99
Jan-99
Jul-98
Jan-98
30%
75
25%
20%
15%
Jul-08
Jan-08
Jul-07
Jan-07
Jul-06
Jan-06
Jul-05
Jan-05
Jul-04
Jan-04
Jul-03
Jan-03
Jul-02
Jan-02
Jul-01
Jan-01
Jul-00
Jan-00
Jul-99
Jan-99
Jul-98
Jan-98
0
Past performance is no guarantee of future results. It is not possible to invest directly in an index.
Source: Lexis Nexis, Strategic Insight, FMRCo (MARE) as of 8/31/2008.
19
Market Volatility at Historic Highs
VIX
90
80
56.10
60
50
40
30
Index Level
70
20
10
'92
'94
'96
'98
'00
'02
'04
CBOE Market Volatility Index 11/7/2008
'06
'08
0
Source: Factset
20
“I want my bubble back.”
21
Historical U.S. Stock Bear Markets (1926 - 2008)
Historical U.S. Stock Bear Markets (1926-2008)
Peak
Trough
Duration
(Months)
Bear Market
Magnitude
Recession
During
Bear?
9/3/1929
7/8/1932
34
-86%
Yes
124%
3/10/1937
4/28/1942
61
-60%
Yes
59%
3/24/2000
10/9/2002
31
-49%
Yes
34%
1/11/1973
10/3/1974
21
-48%
Yes
38%
10/9/2007
10/10/2008
12
-43%
?
?
11/29/1968
5/26/1970
18
-36%
Yes
44%
8/25/1987
12/4/1987
4
-34%
No
23%
5/29/1946
6/13/1949
37
-30%
Yes
42%
12/11/1961
6/26/1962
6
-28%
No
33%
11/28/1980
8/12/1982
21
-27%
Yes
58%
2/9/1966
10/7/1966
8
-22%
No
33%
8/2/1956
10/22/1957
14
-22%
Yes
31%
7/16/1990
10/11/1990
3
-20%
Yes
29%
Average (excluding 07-08):
22
-39%
-
46%
1-Yr Return
After Trough
Source: ISI, Bloomberg, National Bureau of Economic Research, Haver Analytics, FMRCo (MARE) as of 10/20/2008. Recessions are defined by the National Bureau of
Economic Research.
[i] – All stock returns represented by S&P 500 Index returns.
Past performance is no guarantee of future results. You cannot invest directly in an index. The S&P 500®, a market capitalization-weighted index of common stocks, is a
registered service mark of the McGraw-Hill Companies, Inc. and has been licensed for use by Fidelity Distributors Corporation.
22
Best U.S. Stock Returns Have Been
Born Out of Troubled Times
Three Best Periods to Enter the U.S. Stock Market Since 1926
Subsequent
5-Year Return
Coincident Event
May 1932
367%
Great Depression
July 1982
267%
Worst Recession in Past 25 Years
Dec 1994
251%
Most Dramatic Fed Tightening in Past 20 Years
Date
U.S. stock market returns represented by total return of S&P 500 ® Index. Past performance is no guarantee of future results. It is not possible to invest in an index.
Three dates determined by best five-year market return subsequent to the month shown.
Sources: Ibbotson, FMRCo (MARE) as of September 30, 2008.
23
The Benefits of Diversification
Jan 2000 – June 2008
Average Annual
Total Return
Total Return
Over Period
U.S. Large-Cap
0%
1%
U.S. Mid-Cap
7%
83%
U.S. Small-Cap
5%
52%
Foreign Developed Country
4%
39%
Emerging Markets
13%
176%
Investment-Grade Bonds
6%
68%
Diversified Total Portfolio
4%
35%
Diversification does not ensure a profit or guarantee against loss.
U.S. Mid-Cap – Russell MidCap Index; U.S. Small-Cap – Russell 2000 Index; Foreign Developed Country – MSCI EAFE Index; Emerging Markets – MSCI Emerging Markets Index;
Investment-Grade Bonds – Lehman Brothers Aggregate Bond Index; Diversified Total Portfolio – Hypothetical portfolio composed of 60% U.S. stock portfolio (80% S&P 500, 15% U.S.
Mid-Cap, 5% U.S. Small-Cap), 15% international stocks (75% Foreign Developed Country, 25% Emerging Markets), and 25% Investment-Grade Bonds.
Source: Ibbotson, FMRCo (MARE) as of 6/30/08.
24
Missing Only a Few of the Stock Market’s Best
Days Can Erode Long-Term Returns
$250,000
Hypothetical Growth of $10,000 Invested in the
S&P 500® from Jan 1, 1980 – Oct 31, 2008
($1000s)
Value of Investment at 10/31/2008
$202,730
$200,000
$150,000
$134,842
$104,648
$100,000
$45,703
$50,000
$22,969
$0
All Days
Missing Best 5 Missing Best
Days
10 Days
Missing Best
30 Days
Missing Best
50 Days
The hypothetical example assumes an investment that tracks the returns of the S&P 500® Index and includes dividend
reinvestment but does not reflect the impact of taxes which would lower these figures. There is volatility in the market and a
sale at any point in time could result in a gain or loss. Your own investment experience will differ, including the possibility of
losing money. You cannot invest directly in an index. The S&P 500®, a market capitalization-weighted index of common
stocks, is a registered service mark of the McGraw-Hill Companies, Inc. and has been licensed for use by Fidelity
Distributors Corporation. Source: FMRCo (MARE) as of 10/31/08.
Fidelity Investments Institutional Services Company, Inc., 82 Devonshire Street, Boston, MA 02109. 510459.1.0
25
Historical Performance During Recessions
Average Annual Returns During a Recession (%)
10
8
6
4
2
0
-2
-4
-6
-8
-10
Staples
Source FMRCo 9/30/2008
Health Care
Utilities
Telecom
Materials
Discretionary
Financials
Energy
Technology
Industrials
Sector returns represented by S&P 500 sectors. Please refer to the Appendix for important index information.
26
The Global S-Curve: Globalization to Continue
The Global S-Curve
Per Capita GDP (2005 US$)
100,000
Source:
Source: CIA
CIA World
World Factbook,
Factbook, Haver
Haver Analytics.
Analytics
Bubbles depict per capita
Bubbles
oildepict
consumption
population
(2005
as barrels
of 2005.per capita per year).
Norway
Norway
Norway
USA
USA
USA
Ireland
Ireland
Ireland
Hong Kong
Hong
HongKong
Kong
Japan
Japan
Belgium
Australia
Australia
Denmark
Belgium
Canada
Sweden
Sweden
Australia
Japan
Denmark
Denmark
Belgium
Canada
Germany
Sweden
France
Germany
Germany
Italy
Singapore
Spain
France
Italy
Italy France
Singapore
Singapore Spain
South
South Korea
Korea
South Korea
Portugal
Portugal
UK
UK
Netherlands
Netherlands
Netherlands
Portugal
Chile
Chile
Chile
10,000
Tunesia
Tunesia
Mexico
Russia
Mexico
Mexico
Brazil
Brazil
China
China
China
Brazil
Philipines
Philipines
India
India
India
Philipines
Pakistan
Pakistan
Zimbabwe
Zimbabwe
Iraq
Iraq
Iraq
Zimbabwe
Nigeria
Nigeria
Nigeria
Mali
Mali
Mali
Years of Economic Development
1,000
-100
-50
0
50
100
150
200
250
300
350
27
Fixed Income Markets: Yield Curve has Steepened
in bp
Historic Yield Curve Shapes
150
100
50
0
-50
-100
-150
-200
-250
-300
9/30/08
Avg. 1983 - 2007
9/28/07
Individual quarters
since 1983 are in
gray
0
2
5
10
Years
Source: Bloomberg® and FMR Co., as of 9/30/08
28
Fixed Income Markets: Spreads Reaching Extreme
Levels
Credit Spreads
2.98 3%
2.5%
2%
1.5%
1%
0.5%
88
91
93
96
98
01
03
06
08
Yield Spread: Moody's Baa minus Moody's Aaa: 11/7/2008
Source: FMR, Factset
29
High Yield and Emerging Market Debt: Risk
Aversion Reaching Extremes
Spread vs US 10 Year Treasury
1,800
1511.41
1,600
1,400
1,200
1,000
800
655.97
600
418.45 400
297.18
200
'04
'06
'08
0
JP Morgan EMBI Global Spread 11/7/2008
(AVG) EMBI
Merrill Lynch U.S. High Yield Master II Yield to Worst 11/7/2008
(AVG) ML US HYM II
Source: Factset
30
Municipal Yield Ratios: Recent Flight to Treasuries
Municipal to Treasury Yield Ratio
2
1.76
1.5
1.29
1
'02
'04
'06
'08
0.5
Muni Yield divided by Treasury Yield (10Y) 10/31/2008
(AVG) 10 Year Average
Muni Yield divided by Treasury Yield (1-2 Y) 10/31/2008
(AVG) 1-2 Year Average
Past performance is not a guarantee of future results. Yield ratio is calculated as the yield to worst of Lehman Bros
Municipal Bond benchmarks vs. its Treasury counterpart of the same maturity. Source: Factset
31
Floating Rate at Above Average Spreads
SpreadSpread
over 3over
month
LIBOR
Treasuries
340
320
300
275.33
280
260
240
220
'92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08
CSFB Leveraged Loan Index, Spread 10/31/2008
CSFB Leveraged Loan Index, Average Spread 10/31/2008
Source: Factset
200
32
Appendix
33
High Quality Credits – Spread over Treasuries
Basis Point Spread over Treasuries - 10 Year Maturity
600
500.00 500
400
350.00
300
255.00
215.00 200
100
'06
BBB Rated
A Rated
Source: Factset
'07
'08
0
AA Rated
AAA Rated
34
TIPS Break Even Spreads Reflecting Eased Inflation
Concerns
TIPS Break Even Spreads
3%
2.5%
2%
1.5%
1%
0.88
98
02
10 Yr Tips 11/7/2008
05
08
0.5%
Source: Factset
35
Oil: A Huge Factor in the Global Economy
Oil Price and Consumption
$160
90
$140
85.23
$120
$100
85
80
$80
61.03
$60
$40
75
70
$20
$0
'94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08
65
World Oil Consumption (million bbl/day) (Right) 6/30/2008
WTI Light Crude Spot (Left) 11/7/2008
Source: Factset
36
Commodities: Recent Correction
Commodities
Corn
500
$800
$700
400
$600
300.05 300
$500
200
375.50 $400
$300
100
'00
'02
'04
'06
0
'08
Dow Jones - AIG Commodity Spot Index 10/31/2008
Crude Oil
$200
'00
'02
'04
'06
Corn Futures 11/7/2008
$100
'08
S&P 500
$175
1,600
$150
61.03
$125
1,400
$100
1,200
$75
930.99
$50
800
$25
'00
'02
'04
'06
'08
Spot Light Crude 11/7/2008
Source: Factset
$0
1,000
'00
'02
'04
'06
S&P 500 11/7/2008
'08
600
37
Aversion to Risk has Sent Yields Lower
United States Government Bond Yield Curve
One Week Ago
One Month Ago
One Year Ago
Now
5%
4%
3%
2%
1%
6M 2Y 3Y
5Y
Source: Factset 11-7-2008
10Y
0%
30Y
38
Leading Indicators
Composite Leading Indicators
106
104
102
100
98
96
94
92
11/1/2005
Japan 9/30/2008
USA 9/30/2008
Source: Factset
11/2/2006
Euro Area 9/30/2008
90
11/3/2008
11/2/2007
UK 9/30/2008
China 8/29/2008
39
Questions ?
40
Past performance is no guarantee of future results.
Foreign investments, especially those in emerging markets, involve greater risks and may offer greater potential returns than US investments. These risks include the
political and economic uncertainties of foreign countries, as well as the risk of currency fluctuations.
Sector investments may involve greater volatility than more broadly diversified investments.
The securities of smaller, less well-known companies may be more volatile than those of larger companies.
Lower-quality debt securities involve greater risk of default or price changes due to the credit quality of the issuer.
All indices are unmanaged and assume the reinvestment of all distributions. It is not possible to invest directly in an index.
MSCI/S&P Global Industry Standard is a classification scheme that offers a mean of classifying industry sectors globally so that holdings can be categorized consistently
across both domestic and international equity funds.
The Consumer Price Index represents changes in prices of all goods and services purchased for consumption by urban households. Core Consumer Price Index is the
consumer price index excluding food and energy.
GDP is the total value of goods and services produced in the US. Real GDP is GDP adjusted for changes in prices.
Leading Economic Indicators are selected economic statistics that have proven valuable as a group in estimating the direction and magnitude of economic change.
Fed Funds rate is the rate of interest on overnight loans of excess reserves among commercial banks.
The S&P 500 Index is a registered service mark of The McGraw-Hill Companies, Inc. and has been licensed for use by Fidelity Distributors Corporation and its affiliates.
It is a unmanaged market capitalization-weighted index of common stocks. S&P Sector indices include Technology, Healthcare, Consumer Discretionary, Consumer
Staples, Integrated Oils, Other Energy, Materials & Processing, Producer Durables, Autos & Transportation, Financial Services, Utilities and Other
The Russell Top 200 Index®, is an unmanaged index comprised of the largest 200 companies in the Russell 3000 index. The Russell Top 200 Value and Growth
indices comprise of value and growth stocks respectively as determined by Frank Russell & Co.
The Russell 1000 Index is an unmanaged index that consists of the largest 1000 companies in the Russell 3000 Index. This index represents the universe of large
capitalization stocks from which most active money managers typically select. The Russell 1000 Value and Growth indices comprise of value and growth stocks
respectively as determined by Frank Russell & Co.
The Russell MidCap Index is an unmanaged market capitalization weighted index of 800 smallest companies in the Russell 1000 index which represents almost 35% of
the total market capitalization. The Russell MidCap Value and Growth indices comprise of value and growth stocks respectively as determined by Frank Russell & Co.
The Russell 2000 Index is an unmanaged market capitalization-weighted index of 2,000 small company stocks. The Russell 2000 Value and Growth indices comprise of
value and growth stocks respectively as determined by Frank Russell & Co.
The Russell 3000 Index is an unmanaged index which measures the performance of the 3,000 largest U.S. companies based on total market capitalization, which
represents approximately 98% of the investable U.S. equity market. As of the latest reconstitution, the average market capitalization was approximately $4.6 billion; the
median market capitalization was approximately $732 million. The index had a total market capitalization range of approximately $487 billion to $147 million.
41
Bonds are rated by agencies such as Standard & Poor’s and Moody’s Investor Services with ratings that measure the risk of default.
Bonds rated AAA are considered to be the safest while those rated below BBB are considered to be “high yield” or below investment grade. Intermediate ratings of
AA+ or BB- are often used to further differentiate bonds.
JP Morgan Emerging Markets Global Bond Index is a market value weighted index of US dollar denominated Brady bonds, Eurobonds, traded loans, and local market
debt instruments issued by emerging market sovereign and quasi-sovereign entities, covering 27 emerging market countries.
Lehman Bros Municipal index is an unmanaged index of all investment grade municipal securities with at least 1 year to maturity.
Lehman Brothers Aggregate Bond Index is an unmanaged market value weighted performance benchmark for investment-grade fixed rate debt issues, including
government, corporate, asset backed , mortgage backed securities with a maturity of at least 1 year.
Lehman Brothers Credit Index is an unmanaged index composed of all publicly issued, fixed interest rate, nonconvertible, investment grade corporate, asset backed
debt with at least 1 year to maturity
The Lehman Brothers TIPS Index is an unmanaged index comprising all US Treasury Inflation Indexed Notes and Bonds having a maturity of at least 1 year.
The Lehman Brothers Treasury Index is an unmanaged index comprising all US Treasury Notes and Bonds having a maturity of at least 1 year.
The Lehman Brothers Government Index is an unmanaged index comprising of the US Treasury & Agency bonds having a maturity of at least 1 year.
The Merrill Lynch High Yield Master II Index is a market value weighted index of corporate bonds publicly issued in the U.S. domestic market that have a rating of less
than BBB3 and at least one year remaining term to maturity.
Ibbotson Intermediate Government Bond Index is a market value weighted index of US Government Bonds with maturity of at least 1 year.
The Organization of Economic Development, or OECD, is a multinational agency that monitors economic conditions in developed and developing markets.
30-year treasury and 10 year treasury are a fixed income securities backed by the full faith and credit of the U.S. government and are used as benchmarks for the
pricing of various corporate fixed income instruments.
MSCI EAFE® index is a unmanaged market capitalization-weighted index that is designed to represent the performance of developed stock markets outside the
United States and Canada. As of June, 2000 the index included over 1,600 equity securities of companies domiciled in 22 countries.
The Dow Jones Industrial Average is a unmanaged price-weighted average of 30 blue-chip stocks that are generally the leaders in their industry and are listed on the
New York Stock Exchange.
NASDAQ Index® a market capitalization-weighted index that is designed to represent the performance of the National Market System which includes over 5,000
stocks traded only over-the-counter and not on an exchange.
42
The S&P 500®, a market capitalization-weighted index of common stocks, is a registered service mark of the McGraw-Hill Companies, Inc. and has been
licensed for use by Fidelity Distributors Corporation.
The following is a definition of the S&P 500 sectors: Consumer Discretionary – Companies that tend to be the most sensitive to economic cycles. Consumer
Staples – Companies whose businesses are less sensitive to economic cycles. Energy – Companies whose businesses are dominated by either of the
following activities: The construction or provision of oil rigs, drilling equipment and other energy-related service and equipment, including seismic data
collection. The exploration, production, market, refining and/or transportation of oil and gas products, coal and consumable fuels. Financials – Companies
involved in activities such as banking, consumer finance, investment banking and brokerage, asset management, insurance and investments, and real estate,
including REITs. Health Care – Companies in two main industry groups: Health care equipment suppliers, manufacturers, and providers of health care
services; and companies involved in research development, production and marketing of pharmaceuticals and biotechnology products. Industrials –
Companies whose businesses manufacture and distribute capital goods, provide commercial services and supplies, provide transportation services.
Information Technology – Companies in technology software & services, and technology hardware & equipment. Materials – Companies that are engaged
in a wide range of commodity-related manufacturing. Telecommunication Services – Companies that provide communications services primarily through a
fixed line, cellular, wireless, high bandwidth and/or fiber-optic cable network. Utilities – Companies considered electric, gas or water utilities, or companies
that operate as independent producers and/or distributors of power.
Before investing, consider the funds' investment objectives, risks, charges, and expenses.
Contact your investment professional or visit advisor.fidelity.com for a prospectus containing
this information. Read it carefully.
Fidelity Investments Institutional Services Co., Inc.
82 Devonshire Street
Boston, Massachusetts 02109
509093.2.0
43