First Quarter 2013 QUARTERLY MARKET UPDATE

Table of Contents

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This report is a product of Fidelity’s Asset Allocation Research Team (AART) with contributions from throughout Fidelity’s asset management organization. AART conducts economic, fundamental, and quantitative research to develop asset allocation recommendations for Fidelity’s portfolio managers and investment teams. AART is responsible for analyzing and synthesizing investment perspectives across Fidelity’s asset management unit to generate insights on macroeconomic and financial market trends and their implications for asset allocation. Primary contributors include Lisa Emsbo-Mattingly (Director of Asset Allocation Research), Dirk Hofschire (SVP, Asset Allocation Research), Miles Betro (Senior Analyst, Asset Allocation Research), and Craig Blackwell (Analyst, Asset Allocation Research).

MARKET SUMMARY 1.

THEME: U.S. HOUSING 2.

ECONOMY/MACRO BACKDROP 3.

U.S. EQUITY MARKETS 4.

INTERNATIONAL EQUITY MARKETS & GLOBAL ASSETS 5.

FIXED-INCOME MARKETS 6.

ASSET ALLOCATION THEMES 7.

Market Summary

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1. S

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4

Market Summary: 2012 Recap, 2013 Outlook The global economy enters 2013 on better footing than one year ago, boosted by a reacceleration in China. Despite still significant policy risks and richer valuations of some riskier asset categories, the outlook for more economically sensitive assets is bolstered by accommodative monetary policies, modest inflationary pressures, and a more favorable global cycle.

Past performance is no guarantee of future results.

• Weak global economy – U.S. in better phase (mid-cycle) – China worse & rising risks – Europe recessionary

• Moderating inflation pressures • Shift toward monetary easing • Policy uncertainty key potential

source of volatility

• Reasonable valuations for risky assets

• Negative for commodities and trade-dependent economies

• Macro-driven, correlated financial markets

• Favor U.S. economically sensitive assets

• Same but improving trend – Same but some late-cycle risks – China exiting growth recession – Same but systemic risk falling

• Same • High level of stimulus ongoing • Same with U.S. fiscal debate on

front burner in Q1

• Same though credit more fully valued

• China recovery may boost these areas for a while; upside limited

• Lower correlations; expect fiscal progress could solidify this trend

• Favor economically sensitive assets

BEGINNING 2012 BEGINNING 2013 TRENDS

IMPLICATIONS

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-60

-40

-20

0

20

40

2008

2002

2000

2001

1990

1984

2011

1982

2007

1993

1992

2005

1986

1987

1994

2004

2010

1988

1985

2006

2012

1991

1983

1989

1998

1995

1996

1999

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2009

Risk Meter: U.S. Stock Minus Treasury Bond Returns, 1982–2012

5

Asset Market Performance Asset prices experienced broad-based gains during 2012. Most economically sensitive asset categories achieved double-digit returns, and the fourth-quarter rally in non-U.S. equities pushed them toward the top of the performance rankings for the year. The risk meter was in the top 35% of most positive quarters during the past 30 years.

Calendar-Year Return Difference (%)

Past performance is no guarantee of future results. You cannot invest directly in an index. See appendix for important index information. Assets represented by: Non-U.S. Small-Cap Stocks – MSCI EAFE Small Cap Index; Real Estate Stocks – NAREIT Equity Only Index; Emerging-Market Stocks – MSCI EM Index; Emerging-Market Bonds – JPMorgan EMBIG+ Index; Non-U.S. Developed-Country Stocks – MSCI ® EAFE Index; U.S. Mid-Cap Stocks – Russell Midcap Index; U.S. Small-Cap Stocks – Russell 2000 Index; U.S. (Large-Cap) Stocks – S&P 500 Index; High-Yield Bonds – Bank of America Merrill Lynch ® (BofA ML) High Yield Master II Index; U.S. Corporate Bonds – Barclays Credit Index; Gold – Gold Bullion, London PM Fix; Investment-Grade Bonds – Barclays U.S. Aggregate Bond Index; U.S. Treasury Bonds – Barclays® Treasury Index; Commodities – DJ-UBS Commodity Index. Source: FactSet, Wall Street Journal, Haver Analytics, Fidelity Investments (AART) as of 12/31/12.

Risk Off

Risk On

2012 (%) Q4 2012 (%) 2012 (%) Q4 2012 (%)

Non-U.S. Small-Cap Stocks 20.4 6.0 U.S. Large-Cap Stocks 16.0 -0.4

Real Estate Stocks 19.7 3.1 High-Yield Bonds 15.6 3.2

Emerging-Market Stocks 18.6 5.6 U.S. Corporate Bonds 9.4 1.1

Emerging-Market Bonds 18.5 3.3 Gold 8.3 -6.7

Non-U.S. Developed-Country Stocks 17.9 6.6 Investment-Grade Bonds 4.2 0.2

U.S. Mid-Cap Stocks 17.3 2.9 U.S. Treasury Bonds 2.0 -0.1

U.S. Small-Cap Stocks 16.3 1.9 Commodities -1.1 -6.3

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Narrow Performance Dispersion across Asset Categories While mostly positive, 2012 asset returns were clustered in a tight range relative to historical averages. The gap between the best and worst performing of eight major asset classes was the narrowest in the past 22 years, while return dispersion among different country equity indices was only half as wide as historical norms.

Dispersion of Calendar-Year Returns, 1990–2012

Largest Average 2012 Largest Average 2012 Largest Average 2012

Asset Class Returns U.S. Equity Sector Returns Country Equity Returns

Narrowest 3rd

Narrowest Narrowest

76% 46% 21% 743% 157% 76% 106% 35% 24%

Spre

ad b

etw

een

Best

and

Wor

st P

erfo

rmer

(Per

cent

age

Poin

ts)

Asset class returns represented by: Investment-Grade Bonds – Barclays U.S. Aggregate Bond Index; High-Yield Bonds – BofA ML U.S. High Yield Master II Index; U.S. Small Cap Stocks – Russell 2000 Index; Real Estate Stocks – NAREIT Equity Only Index; U.S. Large Cap Stocks – S&P 500 Index; Non-U.S. Developed Country Stocks – MSCI EAFE Index; Emerging-Market Stocks – MSCI Emerging Markets Index; Commodities – DJ-UBS Commodity Index. Country equity returns represented by country sub-indices of MSCI ACWI Index; please see appendix for list of countries. U.S. equity sectors represented by MSCI USA Investable Market Index sectors. Source: Morningstar EnCorr, FactSet, Fidelity Investments (AART) as of 12/31/12.

1. S

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RY

28% 29%

0%

10%

20%

30%

40%

50%

60%

1928

19

30

1932

19

34

1936

19

38

1940

19

42

1944

19

46

1948

19

50

1952

19

54

1956

19

58

1960

19

62

1964

19

66

1968

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70

1972

19

74

1976

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78

1980

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82

1984

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86

1988

19

90

1992

19

94

1996

19

98

2000

20

02

2004

20

06

2008

20

10

2012

7

Muted Volatility in 2012 By almost any measure, stock volatility declined markedly in 2012, reflecting a surprisingly calm market environment for much of the year. As a measure of daily price movements, the percentage of trading days up or down by more than 2% plunged to a six-year low, while the calendar-year trading range for the S&P 500 Index was in the tightest quartile since 1928.

S&P 500 Daily Price Volatility

Long-term averages are from 1928 to 2012 for the S&P 500 and from 1986 to 2012 for the VIX (Volatility Index); pps = percentage points. Source: Bloomberg, Standard & Poor’s, Haver Analytics, Fidelity Investments (AART) as of 12/31/12.

2%

Calendar-Year Trading Range

Average VIX Index Level

Long-Term Average 28 pps 21

2011 21 pps 24

2012 17 pps 18

1. S

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0.0

0.1

0.2

0.3

0.4

0.5

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0.8

1985

19

86

1987

19

88

1989

19

90

1991

19

92

1993

19

94

1995

19

96

1997

19

98

1999

20

00

2001

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04

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06

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20

08

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20

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2011

20

12

Correlation Average

8

Lower Correlations, Better Active Management Opportunities After hitting record-high performance correlations among U.S. stocks during 2011, 2012 experienced a significant decline to lower levels. In a less macro-driven environment, fundamentals could again be bigger drivers of relative equity performance, as stocks with higher and surprisingly good earnings growth outperformed after an anomalous 2011.

Correlation of Stock Returns

60-Day Correlations among Russell Top 200 Stocks

You cannot invest directly in an index. See appendix for important index information. LEFT: Source: Fidelity Investments (AART) as of 11/30/12. RIGHT: Earnings data through Q3 2012. Source: FactSet, Fidelity Investments (AART) as of 9/30/12.

-5

0

5

10

15

20

1995–2011 2011 2012

Earnings Surprise Earnings Growth

Annualized Relative Return (%)

Performance of Top Earnings Surprise and Growth Quintiles vs. Russell 1000

Aug-2011 (0.71)

Dec-2012 (0.37)

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Theme: U.S. Housing

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Supply-Demand: Excess Worked Off, Demand Pent Up Historically low levels of building activity, population growth, and an aging housing stock have allowed the U.S. to work off the oversupply. Weak economic growth led to low household formation, contributing to pent-up demand. Tight supply-demand conditions make the recovery increasingly self-sustaining and less sensitive to broader economic trends.

8%

9%

10%

11%

12%

13%

14%

15%

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

2010

2012

% of 25–34 year olds living with parents

0

500

1,000

1,500

2,000

2,500

3,000

1967

1970

1973

1976

1979

1982

1985

1988

1991

1994

1997

2000

2003

2006

2009

2012

Housing Starts

Young Adults Living with Parents Construction Activity

SAAR, Thousands

LEFT: SAAR = Seasonally adjusted annualized rate. Source: Census Bureau, Fidelity Investments (AART) through 11/30/12. RIGHT: Source: Bureau of Labor Statistics, Census Bureau, Zelman & Associates, Fidelity Investments (AART) through 12/31/12.

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11

Dramatic Reversal in Housing Indicators After nearly seven years of acting as a significant drag on the economy, the housing recovery is now underpinned by a broad-based turnaround in a wide variety of factors, including historically high levels of affordability and rising prices. Most activity metrics remain below historical averages, leaving the potential for a meaningful and sustained boost to the economy.

Housing supply = combined existing and new home inventories from National Association of Realtors, Census Bureau as of 7/31/10 (worst), 11/30/12 (latest). Household growth rate from Census Bureau as of 12/31/08 (worst), 9/30/12 (latest). Housing Affordability Index compares hypothetical mortgage payment on median-priced house to median household income (index of 100 means median payment = income necessary to meet traditional loan quality standards) from National Association of Realtors as of 6/30/06 (worst),10/31/12 (latest). Home prices from Standard & Poor’s as of 4/30/06 (worst), 10/31/12 (latest). Change of 1.4% for price expectations compounded over five years is 7.2%, price expectations according to University of Michigan Consumer Sentiment Survey as of 12/31/11 (worst), 12/31/12 (latest). Household wealth from Federal Reserve Board for Q4-06 to Q4-11 (worst), Q4-11 to Q3-12 (latest). Real estate jobs include residential construction, residential specialty trade contractors, and real estate, rental & leasing categories from Bureau of Labor Statistics for 3/31/06 to 1/31/11 (worst), 1/31/11 to 11/30/12 (latest). Construction starts from Census Bureau as of 1/31/09 (worst), 11/30/12 (latest). Contribution to GDP from Bureau of Economic Analysis as of 12/31/07 (worst), 9/30/12 (latest). Source: Haver Analytics, Fidelity Investments (AART).

Trend Indicator Worst Latest Comments

Low Supply Months of supply at current sales rate 11.3 Months 4.9 Months Below long-term average

Pent-Up Demand Household growth rate –0.20% 0.9% Near average rate of 2000s

High Affordability Housing Affordability Index 100.9 198.5 Record high affordability

Rising Home Prices S&P/Case-Shiller Home Price Index, year-over-year change –18.9% 4.3% Index level up 5% from trough,

down 30% from peak Consumers’ forward 5-year price expectations 0.9% 2.3% 1.4% annual difference, or

cumulative 7.2% over 5 years

Rising Wealth Change in value of households’ real estate assets –$6 trillion +$1 trillion Real estate makes up 25% of

total household assets

Rebounding Activity

Real estate–linked jobs lost/added –1.6M +56K Down 1.6M from peak, up 56K

from trough

Construction starts, year-over-year change –54% +22% Still 50% below long-term

average

Contribution to GDP from residential construction (annualized)

–1.2% +0.3% Negative in 2006–2009, positive over last year

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Transactions • Banks • Attorneys, appraisers • Title & mortgage insurers • Realtors

Existing Homes • Remodeling/renovation • Building materials • Contractors • Electrical & mechanical

Household Durables • Furnishings • Carpeting/flooring • Appliances

New Homes • Homebuilders/

construction workers • Timber/building materials • Land sales

12

Housing Activity Has Large Multiplier Effect across Economy U.S. residential housing is one of the most important sectors for the health of the overall economy. Increased transaction activity has broad implications for the banking sector and the health of the financial system. Direct economic activity from home construction understates housing’s full GDP impact when considering other segments of the home purchase process.

For illustrative purposes only. Source: Fidelity Investments (AART).

2. T

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Recovery Underpins Consumer, Financials Typically an early-cycle industry, housing affects the huge consumer sector. U.S. consumers are significantly invested in real estate and tend to link their opinions of the economy with their views of future home price movements. Recent price gains and a brightening outlook have buoyed economic sentiment as well as household and financial institution balance sheets.

0

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98

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Real Estate Assets Financial Assets

Consumer Confidence Household Assets

Dollars (Trillions) Dollars (Trillions)

LEFT: Net % of respondents expecting home prices to increase vs. decrease over next year. Source: University of Michigan, Haver Analytics, Fidelity Investments (AART) through 12/31/12. RIGHT: Source: Federal Reserve Board, Haver Analytics, Fidelity Investments (AART) through 9/30/12.

40

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Jun-

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Net Home Price Expectations Consumer Sentiment

Net % Expecting Home Price Increases Confidence Index Level

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Economy/Macro Backdrop

3. E

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15

Mixed Trends, But Signs of Improvement in Global Economy Although progress remains uneven across the world, recent global economic data have generally been better than expected. Importantly, China has shown signs of a rebound and now appears to be in an early-cycle expansion. The U.S. and Germany remain in the mid-cycle and late-cycle phases, respectively, and Japan has entered a recession.

For developed economies, we use the classic definition of recession, involving an outright contraction in economic activity. For developing economies, such as China, we have adopted “growth cycle” definition because they tend to exhibit strong trend performance driven by rapid factor accumulation and increases in productivity, and deviation from trend tends to matter most for asset returns. Source: Fidelity Investments (AART) through 12/31/12.

3. E

CO

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MY

0% 10% 20% 30% 40% 50% 60% 70% 80% 90%

100%

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

0% 10% 20% 30% 40% 50% 60% 70% 80% 90%

100%

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Level Momentum

Mexico 57.1 1.0

India 54.7 0.9

China 51.5 1.0

Brazil 51.1 -0.1

U.S. 50.7 0.1

Taiwan 50.6 2.0

Canada 50.4 -0.3

S. Korea 50.1 1.5

S. Africa 49.5 0.0

Euro Area 46.1 0.2

Japan 45.0 -1.1

16

Weak Growth, But Improving Trend in Global Manufacturing After significant weakness in global trade and industrial activity since late 2011, signs of an uptick emerged toward the end of 2012. According to purchasing managers’ index data, most countries still have contracting manufacturing sectors, but a majority have registered higher levels in recent months.

% of Countries with Expanding Manufacturing Sectors

% of Countries with Positive Momentum

Purchasing Managers’ Index (PMI) reading above 50 indicates manufacturing sector expansion. Momentum = difference between most recent data and trailing three-month average. Please see appendix for list of countries. Source: Institute for Supply Management, HSBC, Markit, Haver Analytics, Fidelity Investments (AART) through 12/31/12.

47%

63%

3. E

CO

NO

MY

17

Surge in Credit Propels Recovery in China Liquidity conditions in China have accelerated to a pace similar to the credit boom in 2009, with shadow financing accounting for the bulk of the growth. Infrastructure spending and real estate activity have boosted the economy, but the quality and sustainability of the recovery remain questionable amid the emphasis on credit and government-driven activity.

China Bank Loans & Other Financing

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Bank Loans Other Financing Sources

Total Social Financing (Yuan, Trillions)

LEFT: Shadow financing is provided by non-bank entities. Source: People’s Bank of China, Haver Analytics, Fidelity Investments (AART) through 11/30/12. RIGHT: Infrastructure investment includes railways, highway, waterway, and air transport fixed-asset investment. Source: China National Bureau of Statistics, Fidelity Investments (AART) through 11/30/12.

China Infrastructure & Real Estate

90

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108

-20%

-10%

0%

10%

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30%

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80%

Mar

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-07

Apr-

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Sep-

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Feb-

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Jul-0

9 D

ec-0

9 M

ay-1

0 O

ct-1

0 M

ar-1

1 Au

g-11

Ja

n-12

Ju

n-12

N

ov-1

2

Infrastructure Investment Real Estate Climate Index

Infrastructure (Year-over-Year Change) Real Estate Climate Index Level

3. E

CO

NO

MY

-50

-25

0

25

50

75

100 -80

-60

-40

-20

0

20

40

1990

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1998

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2012

Willingness to Make Consumer Loans Tightening Commercial & Industrial Loans

18

U.S. Inventory and Credit Cycles Still Positive Two key cycles for ongoing mid-cycle expansion—the inventory cycle and the credit cycle—remained constructive at the end of 2012. Manufacturers’ inventories held steady relative to underlying demand. As banks continued to ease lending standards, access to credit improved for both corporations and consumers, and corporate debt issuance hit a record high.

Corporate & Consumer Credit Standards

Shading reflects recessions as defined by National Bureau of Economic Research. LEFT: Source: Census Bureau, Haver Analytics, Fidelity Investments (AART) through 10/31/12. RIGHT: Consumer loans exclude mortgages and include credit cards, auto loans, and other consumer loans. Source: Federal Reserve Board, Haver Analytics, Fidelity Investments (AART) through 10/31/12.

(Net %) (Inverted, Net %)

Mor

e W

illing

Le

ss W

illing

Eas

ier S

tand

ards

Ti

ghte

r Sta

ndar

ds

1.0

1.1

1.2

1.3

1.4

1.5

1.6

Oct

-95

Oct

-96

Oct

-97

Oct

-98

Oct

-99

Oct

-00

Oct

-01

Oct

-02

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-03

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Oct

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-09

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-10

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Oct

-12

Inventory-to-Sales Ratio

Manufacturers’ Inventories

3. E

CO

NO

MY

50

70

90

110

130

150

170

190

210

230

250

-20

-10

0

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20

30

40

Nov

-02

May

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-05

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-08

Nov

-08

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-09

Nov

-09

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-10

Nov

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May

-11

Nov

-11

May

-12

Nov

-12

Expectations for Capital Expenditures Economic Policy Uncertainty Index

2%

3%

4%

5%

6%

7%

8%

8%

10%

12%

14%

16%

18%

1985

1988

1991

1994

1997

2000

2003

2006

2009

2012

Profit Margins Corporate Profits as % of GDP

19

Some Late-Cycle Pressures in Corporate Sector Corporate profitability remained robust, near historic highs relative to GDP, but the profit cycle has shown signs of weakening amid slowing growth and profit margins that may have limited upside. Faced with the fiscal cliff and persistent uncertainty, companies pared back capital spending and plans for future investment, weakening the economy during the fourth quarter.

Corporate Profits & Profit Margins Policy Uncertainty & Spending Plans

Shading reflects recessions as defined by National Bureau of Economic Research. LEFT: EBIT = Earnings before interest and taxes. Profit margin data for top 3,000 publicly traded companies by market capitalization. Source: Bureau of Economic Analysis, Haver Analytics, Fidelity Investments (AART) through 9/30/12. RIGHT: SA = seasonally adjusted. Source: Federal Reserve Bank of Philadelphia, policyuncertainty.com, Haver Analytics, Fidelity Investments (AART) through 11/30/12.

EBIT-to-Sales Ratio Profits as % of GDP Net % of Business Expecting Capital Expenditure Increase (SA) Economic Policy Uncertainty Index

3. E

CO

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MY

1

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9

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Jan-

11

Feb-

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Mar

-11

Apr-

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-11

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Jul-1

1 Au

g-11

Se

p-11

O

ct-1

1 N

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1 D

ec-1

1 Ja

n-12

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b-12

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ar-1

2 Ap

r-12

M

ay-1

2 Ju

n-12

Ju

l-12

Aug-

12

Sep-

12

Oct

-12

Nov

-12

Dec

-12

Italy Spain

“The ECB is ready to do whatever it takes

to preserve the euro.” – ECB President Mario Draghi

July 26, 2012

Euro Debt Crisis Calm, But Real Economy Continues to Suffer Policy efforts employed throughout 2012, particularly the announcement of a new bond-buying plan by the European Central Bank, helped to lower peripheral sovereign yields and put the debt crisis on the backburner. However, ongoing deleveraging by both banks and governments has taken a toll on real economic activity, and credit standards have continued to tighten.

Italy & Spain: Two-Year Bond Yields Eurozone Bank Credit Standards

-20

-10

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30

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70

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12

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-12

Housing Loans Consumer Loans Business Loans

Two-Year Treasury Yield (%)

Past performance is no guarantee of future results. ECB = European Central Bank. LEFT: Source: Reuters, Haver Analytics, Fidelity Investments (AART) through 12/31/12. RIGHT: Source: European Central Bank, Fidelity Investments (AART) through 12/31/12.

Net % of Banks Tightening Standards

Tigh

ter

Eas

ier

20

3. E

CO

NO

MY

21

Fed Boosts New Easing, Money Velocity Remains Muted The pace of the Federal Reserve’s latest quantitative easing would add $85 billion of new securities per month and raise the Fed’s balance sheet to nearly $5 trillion if continued through 2014. While the aggressive posture boosts liquidity and investor risk sentiment, money velocity remains low, implying little inflationary pressure is transmitting through bank lending.

4x

6x

8x

10x

12x

14x

16x

18x

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

5.0

Mar

-08

Jun-

08

Sep-

08

Dec

-08

Mar

-09

Jun-

09

Sep-

09

Dec

-09

Mar

-10

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10

Sep-

10

Dec

-10

Mar

-11

Jun-

11

Sep-

11

Dec

-11

Mar

-12

Jun-

12

Sep-

12

Dec

-12

Mar

-13

Jun-

13

Sep-

13

Dec

-13

Mar

-14

Jun-

14

Sep-

14

Dec

-14

Fed Agency Debt MBS Purchases

Liquidity to Key Credit Markets

Lending to Financial Institutions

Long-Term Treasury Purchases

Traditional Security Holdings

Money Velocity

Fed

Asse

ts ($

Tril

lions

)

MBS = Mortgage-Backed Securities. Money velocity = ratio of Gross Domestic Product to Monetary Base. Shaded regions indicate estimates for 2013 and 2014. Source: Federal Reserve Bank of St. Louis, Federal Reserve Board, Haver Analytics, Fidelity Investments (AART) through 12/31/12.

Federal Reserve Assets & Money Velocity

Dec-2012 Holdings

Assumed Monthly Purchases

Projected Holdings

2013 2014

Long-Term Treasuries $1.3 Trillion $45 Billion $1.8 Trillion $2.4 Trillion

MBS $1.0 Trillion $40 Billion $1.4 Trillion $1.9 Trillion

Mon

ey V

eloc

ity (R

atio

)

3. E

CO

NO

MY

0%

5%

10%

15%

20%

25%

30%

35%

Mar

-05

Aug-

05

Jan-

06

Jun-

06

Nov

-06

Apr-

07

Sep-

07

Feb-

08

Jul-0

8 D

ec-0

8 M

ay-0

9 O

ct-0

9 M

ar-1

0 Au

g-10

Ja

n-11

Ju

n-11

N

ov-1

1 Ap

r-12

Se

p-12

Brazil China Russia U.S.

-60%

-40%

-20%

0%

20%

40%

60%

80%

100%

Mar

-05

Aug-

05

Jan-

06

Jun-

06

Nov

-06

Apr-

07

Sep-

07

Feb-

08

Jul-0

8 D

ec-0

8 M

ay-0

9 O

ct-0

9 M

ar-1

0 Au

g-10

Ja

n-11

Ju

n-11

N

ov-1

1 Ap

r-12

Se

p-12

Energy Agriculture

22

Inflation: Muted Pressures, Though Higher in EM Rising wages have stoked core inflation pressures in many emerging-market economies, pressuring profits and creating some late-cycle dynamics. In the U.S., however, weak wage growth due to slack labor markets has kept core inflation in check. Commodity prices have been well contained amid muted global demand, reducing some risks to headline inflation.

22

Year-over-Year Change

Commodity Inflation

EM = emerging market(s). LEFT: Overall earnings data for Brazil, China, and U.S. Accrued wages data used for Russia. Source: country statistical organizations, Haver Analytics, Fidelity Investments (AART) through 9/30/12. RIGHT: S&P GSCI indices used to represent agriculture and energy prices. Source: Standard & Poor’s, Haver Analytics, Fidelity Investments (AART) as of 12/31/12.

Wage Inflation

Year-over-Year Change

3. E

CO

NO

MY

Fiscal Uncertainty and Opportunity in 2013 Since 2011, continuing but indecisive fiscal policy debates clouded visibility on tax rates, created concern about Washington’s ability to deal with debt problems, and generally weighed on economic activity and investor sentiment. In 2013, additional deadlines have the potential to generate market volatility, but may also spur significant action that mitigates uncertainty.

Source: Fidelity Investments (AART).

2011–12 2013

UNCERTAINTY – Tax rates? – Fiscal cliff? – Debt crisis?

IMPLICATIONS – Muted confidence – Lowered equity multiples – Created economic

headwinds & inefficiencies

10-Year Fiscal Consolidation

to Stabilize Debt/GDP

POTENTIAL IMPLICATIONS – Increase confidence (business, consumers, investors) – Multiple expansion – Increase economic productivity

Efficiency Growth Enhancing Sustainability

Tax Reform Entitlement Reform

MINIMUM OPTIMAL ATTRIBUTES

23

3. E

CO

NO

MY

Outlook: Market Assessment According to Fidelity’s Business Cycle Board, composed of portfolio managers responsible for a variety of asset allocation strategies across Fidelity’s asset management unit, the U.S. business cycle remains in expansion. U.S. fiscal policy risk could undermine recent economic improvement in the global economy, but fiscal progress could boost the cycle.

Opportunities: • Global cycle upturn

– Many foreign developed and emerging economies have begun to stabilize or even to positively inflect

Risks: • U.S. fiscal

– Debt ceiling debate threatens to undermine the improvement in economic conditions

Potential Asset Allocation Implications: • Expanding opportunities to diversify global

exposures • Gaining clarity on fiscal framework could spur

corporate capital spending and investor risk-taking

• Any near-term volatility is viewed as an opportunity to add exposure to risk assets

China activity reaccelerating, U.S. economy in mid-cycle

expansion

Accommodative monetary policy supportive of liquidity,

risk sentiment

U.S. fiscal drag offset by housing recovery,

healthy credit availability

Source: Market Assessment Statement of Global Asset Allocation’s Business Cycle Board, Fidelity Investments as of 12/31/12. 24

QU

ARTE

RLY

MAR

KET

UPD

ATE

Firs

t Qua

rter 2

013

U.S. Equity Markets

4. U

.S. E

QU

ITY

26

A Good Year for U.S. Equities Despite somewhat mixed performance in the fourth quarter, U.S. equities posted solid gains in 2012. All major categories were strong, exhibiting narrow performance dispersion among them, although mid caps, value stocks, and especially REITs outpaced large caps and growth stocks for the quarter and the year.

2012 Total Return

Q4 2012 3.1% 1.6% 2.9% 1.9% -0.4% -1.2%

19.7%

17.5% 17.3% 16.3% 16.0%

15.2%

REITs Value Mid Caps Small Caps Large Caps Growth

Past performance is no guarantee of future results. You cannot invest directly in an index. Please see appendix for important index information. Equity market returns represented by: Large Caps – S&P 500 Index; Mid Caps – Russell Midcap Index; Small Caps – Russell 2000 Index; Growth – Russell 3000 Growth Index; Value – Russell 3000 Value Index; Real Estate Investment Trusts (REITs) – NAREIT Equity Only Index. Source: Fidelity Investments (AART) as of 12/31/12.

4. U

.S. E

QU

ITY

Q4 2012 5.9% 2.1% -6.0% 0.1% 3.7% 2.7% -5.7% -1.8% -2.7% -2.9% -0.4%

27

Financials Led Widespread Gains across Sectors Financial and consumer discretionary stocks rose in the fourth quarter and added to their strong returns for the year, boosted by positive dynamics in the housing and credit markets. Other sector returns were generally clustered near the overall market return, with energy and utilities lagging.

2012 Total Return

28.8%

23.9%

18.3% 17.9% 15.3% 15.0% 14.8%

10.8%

4.6%

1.3%

16.0%

Financials Consumer Discretionary

Telecom Services

Health Care Industrials Materials Info Tech Consumer Staples

Energy Utilities S&P 500

Past performance is no guarantee of future results. You cannot invest directly in an index. Please see appendix for important index information. Sector investing involves risk. Because of its narrow focus, sector investing may be more volatile than investing in more diversified baskets of securities. Sector returns represented by S&P 500 sectors. Source: Fidelity Investments (AART) as of 12/31/12.

4. U

.S. E

QU

ITY

28

Current Valuations Suggest Decent Return Expectations Historically, owning stocks when valuation measures are below average has typically resulted in higher-than-average subsequent five-year real returns, while expensive valuations have suggested subpar forward returns. Current valuations are near or below average, which suggests average to above-average intermediate-term return expectations.

Forward Real Return by Price-to-Earnings Quintile, 1926–2012

Forward Real Return by Equity Risk Premium Quintile, 1926–2012

13%

8% 6%

3% 3%

0%

2%

4%

6%

8%

10%

12%

14%

Trailing P/E

12%

4% 4%

6% 7%

0%

2%

4%

6%

8%

10%

12%

14%

Trailing Earnings

5-Yr Real Returns by Cyclically Adjusted ERP Quintile

1st 2nd 3rd 4th 5th

13% 8% 2% 4% 9%

Average 5-Yr Return:

6.6%

5-Yr Real Returns by Cyclically Adjusted P/E Quintile

1st 2nd 3rd 4th 5th

15% 7% 7% 6% 0% P/E = price-to-earnings ratio. Equity risk premium (ERP) = S&P 500 earnings yield (inverse of P/E) minus 10-year Treasury bond yield. Real returns are nominal returns adjusted by inflation rate (Consumer Price Index). Past performance is no guarantee of future results. You cannot invest directly in an index. Cyclically adjusted figures use trailing five-year earnings. Stocks represented by total returns of S&P 500 Index including reinvestment of dividends and interest income. Bonds represented by Barclays Aggregate Bond Index for 1/1976–8/2012 and by composite of IA SBBI Intermediate-Term Government Bond Index (67%) and IA SBBI Long-Term Corporate Bond Index (33%) for 1/1926–12/1975. S&P earnings estimates used for Q4 2012. Source: Standard & Poor’s, Robert Shiller, Fidelity Investments (AART) through 12/31/12.

Trailing 12-Month P/E Quintiles Trailing 12-Month ERP Quintiles Cheap 2nd 3rd 4th Expensive Cheap 2nd 3rd 4th Expensive

Current Quintile (Q4-2012 P/E = 14.3) Current Quintile (Q4-2012 ERP = 5.2%)

Forward Five-Year Annualized Real Total Return Forward Five-Year Annualized Real Total Return

4. U

.S. E

QU

ITY

29

Healthy Balance Sheets Enable Focus on Investor Returns Robust profitability and low interest rates have allowed U.S. corporations to reduce interest expense, shore up balance sheets, and accumulate liquid assets. These high cash balances have enabled companies to deploy cash to shareholders in multiple ways: Both dividends and share buybacks have boosted the total yield to investors.

2.0%

2.5%

3.0%

3.5%

4.0%

4.5%

5.0%

5.5%

6.0%

6.5%

20%

30%

40%

50%

60%

70%

80%

90%

100%

1980

19

82

1984

19

86

1988

19

90

1992

19

94

1996

19

98

2000

20

02

2004

20

06

2008

20

10

2012

Interest Expense Cash

Interest Expense as a % of Profits

Corporate Cash & Interest Expense

LEFT: Interest expense for all non-financial U.S. firms as defined by Bureau of Economic Analysis. Source: Bureau of Economic Analysis, Haver Analytics, Fidelity Investments (AART) as of 9/30/12. RIGHT: Buyback and dividend yields are 12-month sums divided by S&P 500 market capitalization. Source: Standard & Poor’s, Fidelity Investments (AART) through 9/30/12.

Liquid Assets as % of Total Assets

S&P 500 Dividend, Buyback, & Total Yields

0%

1%

2%

3%

4%

5%

6%

7%

8%

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

Buyback Yield Dividend Yield Total Yield

4. U

.S. E

QU

ITY

30

Opportunities for Equity Income as Market Revalues Dividends The current market environment of historically high equity yields relative to bond yields provides attractive opportunities for generating income. Stocks with higher payout ratios have enjoyed higher valuations as the market has paid a premium for the stability of distributed earnings, indicating a potential long-term shift in investor preferences.

S&P 500 Dividend Yield minus 10-Year Treasury Yield

S&P 500 Valuations

21.1 x

16.8 x

14.5 x

12.6 x

10

12

14

16

18

20

22

Payout Ratio >70%

Payout Ratio 50%–69%

Payout Ratio 30%–49%

S&P 500

Forward Price-to-Earnings Ratios

Past performance and dividend rates are historical and do not guarantee future results. LEFT: Source: Standard & Poor’s, Federal Reserve Board, Haver Analytics, Fidelity Investments (AART) through 12/31/12. RIGHT: Source: FactSet, Fidelity Investments (AART) as of 12/31/12.

-12%

-10%

-8%

-6%

-4%

-2%

0%

2%

4%

6%

8%

1936

19

40

1944

19

48

1952

19

56

1960

19

64

1968

19

72

1976

19

80

1984

19

88

1992

19

96

2000

20

04

2008

20

12

4. U

.S. E

QU

ITY Equity Allocations Using Sectors: U.S. Mid-Cycle

A disciplined business cycle approach to sector allocation can produce active returns, although the mid-cycle U.S. economy has historically had the least pronounced relative performance patterns. Quantitative analysis of historic stock market returns shows that sector exposure is a significant factor for explaining differences in performance between individual stocks.

Business Cycle Approach to Sectors

Past performance is no guarantee of future results. Sectors as defined by GICS. LEFT: Green portions suggest historical pattern of outperformance, red portions suggest underperformance, and unshaded portions indicate no clear pattern of out- or underperformance vs. broader market represented by top 3,000 U.S. stocks by market capitalization. Analysis includes performance for 1962–2010. Source: The Business Cycle Approach to Sector Investing, Fidelity Investments (AART) as of May 2012. RIGHT: Anova = analysis of variation. Source: FactSet, Fidelity Investments (AART) as of 12/31/12.

Average Source of Return for Stocks in Russell 3000

Rolling 12-Month Anova Analysis

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

1990

19

91

1992

19

93

1994

19

95

1996

19

97

1998

19

99

2000

20

01

2002

20

03

2004

20

05

2006

20

07

2008

20

09

2010

20

11

2012

Sector Market Cap Style Company

31

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ARTE

RLY

MAR

KET

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ATE

Firs

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013

International Equity Markets & Global Assets

5. IN

TER

NA

TIO

NA

L

20.4% 19.9% 17.9%

9.9% 8.4%

22.5% 21.2% 18.6%

8.9% 8.3%

-1.1%

EAFE Small Cap

Europe EAFE Canada Japan EMEA EM Asia Emerging Markets

Latin America

Gold Commodities

33

Rebound in Non-U.S. Equities, Commodities Trailed After posting losses in 2011, non-U.S. equities registered solid returns across all categories during 2012. Boosted by a strong rally during the fourth quarter, small-cap and emerging-market stocks led the way. The currency impact on returns was mixed across regions and fairly neutral in the aggregate. Commodities lagged during the fourth quarter and declined for the year.

2012 Total Return

2012 Local Currency 21.5% 16.4% 17.9% 7.5% 21.8% 21.5% 18.2% 17.4% 12.5% N/A N/A

Q4 2012 USD 6.0% 7.1% 6.6% 0.9% 5.8% 5.9% 5.9% 5.6% 4.4% -6.7% -6.3%

All returns are gross in U.S. dollars unless otherwise noted. Past performance is no guarantee of future results. You cannot invest directly in an index. Please see appendix for important index information. Index returns represented by: Canada – MSCI Canada Index; Europe – MSCI Europe Index; Japan – MSCI Japan Index; Emerging Markets (EM) – MSCI EM Index; EM Asia – MSCI Emerging Markets Asia Index; Europe, Middle East, & Africa (EMEA) – MSCI EM EMEA Index; Latin America – MSCI EM Latin America Index; Gold – Gold Bullion Price, London PM Fix; Commodities – S&P GSCI Commodities Index. Source: FactSet, Fidelity Investments (AART) as of 12/31/12.

Developed-Market Equities Emerging-Market Equities Commodities

5. IN

TER

NA

TIO

NA

L

34

Mixed Currency Impact on Returns, Commodities Lackluster Equity markets registered gains across most countries, with U.S. investor returns getting a boost from rising local currencies in many of the leading performers. Commodities performed poorly in the fourth quarter, ending a rather lackluster year overall as global demand remained weak.

2012 Commodity Performance

LEFT: All country returns are gross MSCI country indices in US$ unless otherwise noted. Currency impact = difference between gross U.S. dollar returns and gross local currency returns. Source: FactSet, Fidelity Investments (AART) as of 12/31/12. RIGHT: Commodities represented by S&P GSCI Commodity sub-indices. Source: FactSet, Fidelity Investments (AART) as of 12/31/12.

2012 Global Equity Market Performance

6% 6%

1%

-1%

-4%

-6%

-4%

-2%

0%

2%

4%

6%

8%

Agriculture Precious Metals

Industrial Metals

Energy Livestock 0%

5% 14% 14% 15%

19% 21% 22% 23% 23%

26% 29%

32% 47%

65%

0% 20% 40% 60% 80%

Brazil

Spain

Russia

Malaysia

U.K.

S. Africa

Korea

Australia

France

China

India

Mexico

Germany

Egypt

Turkey

Q4 2012 -10% -7% -3% -2% 4%

9%

-8%

2%

9%

-4%

0%

2%

2%

9%

-6%

5%

4%

5%

2%

-10%

Currency Impact U.S. Dollar Total Return Price Return

5. IN

TER

NA

TIO

NA

L

35

Emerging Markets More Important, But Still Underrepresented After a decade of stellar economic growth, developing economies now generate roughly 38% of global economic output. However, emerging-market equities still account for only a small percentage of the global stock market capitalization, leaving plenty of room for future growth.

16%

20%

38%

4% 4%

13%

0%

5%

10%

15%

20%

25%

30%

35%

40%

1992 2002 2012

Share of World GDP Share of World Market Cap

Emerging Market Share of World GDP & Market Cap

Emerging-country market cap as percentage of MSCI All-Country World Index (ACWI) market cap. 2012 GDP data are IMF estimates. Source: FactSet, International Monetary Fund, Haver Analytics, Fidelity Investments (AART) as of 12/31/12.

5. IN

TER

NA

TIO

NA

L

-0.30

-0.15

0.00

0.15

0.30

0.45

0.60

0.75

0.90

Brazil

Emerging Markets Warrant More Balanced Approach The credit quality of emerging-market countries has largely improved over the past two decades. Historically, higher-quality sovereign debt tends to have a lower correlation with a country’s stock market and vice versa. Better diversification effects may be achieved by allocating to both equity and debt securities of countries with rising credit qualities.

Diversification does not ensure a profit or guarantee against a loss. LEFT: Emerging-market debt represented by JP Morgan EMBI Global Index. Source: J.P. Morgan, Bloomberg, Haver Analytics, Fidelity Investments (AART) as of 12/31/12. RIGHT: Equity and bond country returns represented by Brazil sub-index of MSCI Emerging Market Index and JPMorgan EMBI Global Index. Source: FactSet, Fidelity Investments (AART) through 12/31/12.

0%

10%

20%

30%

40%

50%

60%

70%

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

2,000

1993

19

94

1995

19

96

1997

19

98

1999

20

00

2001

20

02

2003

20

04

2005

20

06

2007

20

08

2009

20

10

2011

20

12

% of Universe Rated Investment Grade Stripped Spread

Emerging Market Debt Credit Quality & Valuation

Emerging Market Equity & Bond Correlations

Spread (basis points) % Investment Grade

Brazil Credit Grade Speculative (B2)

Investment (Baa2)

…led to lower correlations

Dec-2003 Dec-2012

Improving credit quality…

Correlation

36

5. IN

TER

NA

TIO

NA

L

37

Non-U.S. Stock Valuations Rose, But Still Below Average Current trailing and forward earnings multiples continued to tick up in both emerging and developed markets with the positive price momentum of the fourth quarter. Yet they remain below the long-term average price-to-earnings ratio.

Emerging Markets’ P/E Ratio

5

7

9

11

13

15

17

19

21

23

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

Trailing P/E Forward P/E Long-Term Avg P/E

Non-U.S. Developed Markets’ P/E Ratio

5

10

15

20

25

30

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

Trailing P/E Forward P/E Long-Term Avg P/E

Price-to-Earnings Ratio Price-to-Earnings Ratio

Past performance is no guarantee of future results. You cannot invest directly in an index. Please see appendix for important index information. Price-to-earnings ratio (P/E) = stock price divided by earnings per share; this P/E “multiple” indicates how much investors are paying for company’s earnings power. Long-term average P/E for Emerging Markets includes MSCI EM Index data for 1988–2011. Long-term average P/E for Non-U.S. Developed Markets includes MSCI EAFE Index data for 1978–2011. Source: FactSet, Fidelity Investments (AART) as of 12/31/12.

QU

ARTE

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MAR

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Firs

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013

Fixed-Income Markets

6. F

IXE

D IN

CO

ME

39

Riskier Assets Led Broad-Based Fixed-Income Gains The most credit-sensitive securities, such as emerging-market debt and high-yield corporate bonds, were the biggest beneficiaries of the improved risk sentiment spurred by global monetary easing during 2012. Treasuries and other defensive assets lagged in the fourth quarter, but stable interest rates over the year once again enabled positive nominal returns.

2012 Total Return

Q4 2012 3.3% 3.2% 1.3% 1.4% 1.1% 0.5% 0.7% 0.7% 0.2% -0.2% 0.1% -0.1% 0.2%

18.5%

15.6%

10.0% 9.6% 9.4% 8.8% 7.0% 6.8%

3.7% 2.6% 2.2% 2.0%

4.2%

EM D

ebt

Hig

h Yi

eld

CM

BS

Leve

rage

d Lo

an

Cre

dit

Long

G

over

nmen

t

TIPS

Mun

icip

al

ABS

MBS

Agen

cy

Trea

surie

s

Aggr

egat

e

Past performance is no guarantee of future results. You cannot invest directly in an index. Please see appendix for important index information. Index returns represented by: Treasury Inflation-Protected Securities (TIPS) – Barclays U.S. TIPS Index; Treasuries – Barclays U.S. Treasury Index; Emerging-Market Debt (EM Debt) – JP Morgan EMBI Global Index; Credit – Barclays Credit Bond Index; Municipal – Barclays Municipal Bond Index; High Yield – BofA ML U.S. High Yield Master II Index; Agency – Barclays U.S. Agency Index; Asset-Backed Securities (ABS) – Barclays ABS Index; Mortgage-Backed Securities (MBS) – Barclays MBS Index; Commercial Mortgage-Backed Securities (CMBS) – Barclays Investment-Grade CMBS Index; Leveraged Loan – S&P/LSTA Leveraged Loan Index; Investment Grade Long – Barclays Government Credit Long Index; Aggregate – Barclays U.S. Aggregate Bond Index. Source: FactSet, Fidelity Investments (AART) as of 12/31/12.

6. F

IXE

D IN

CO

ME

40

Bond Investors Face a Challenging Environment High-quality bonds consistently produced positive real returns during the past three decades. But with the Federal Reserve’s efforts to keep nominal interest rates low while reflating the economy, Treasury yields have fallen below the current inflation rate, creating a challenging environment for bond investors.

10-Year Treasury Yield & Inflation

CPI = Consumer Price Index. Past performance is no guarantee of future results. Total returns represented by IA SBBI U.S. Intermediate-Term Government Bond Index. Real returns are adjusted by rates of inflation. Source: U.S. Treasury, Federal Reserve Board, Haver Analytics, Morningstar EnCorr, Fidelity Investments (AART) as of 12/31/12. Inflation data through 11/30/12.

Total Return Inflation Real

Return

Rising-rate period 1941–1981 3.3% 4.6% -1.3%

Falling-rate period 1981–2012 8.7% 3.0% 5.5%

Entire period 1926–2012 5.4% 3.0% 2.3%

-2%

0%

2%

4%

6%

8%

10%

12%

14%

16%

1953

19

54

1955

19

56

1957

19

58

1959

19

60

1961

19

62

1963

19

64

1965

19

66

1967

19

68

1969

19

70

1971

19

72

1973

19

74

1975

19

76

1977

19

78

1979

19

80

1981

19

82

1983

19

84

1985

19

86

1987

19

88

1989

19

90

1991

19

92

1993

19

94

1995

19

96

1997

19

98

1999

20

00

2001

20

02

2003

20

04

2005

20

06

2007

20

08

2009

20

10

2011

20

12

10-Year Treasury Yield CPI Inflation

6. F

IXE

D IN

CO

ME

41

Uncertainty Drives Need for Multisector Bond Exposure The U.S. economy has abruptly shifted through varying conditions during the past several years. Such shifts have historically affected the relative performance of different fixed-income sectors. Amid high levels of indebtedness and macroeconomic uncertainty, active management of risk exposures across fixed-income categories has become even more important.

Past performance is not a guarantee of future results. Diversification does not ensure a profit or guarantee against a loss. Source: Morningstar EnCorr, Fidelity Investments (AART) as of 12/31/12.

6. F

IXE

D IN

CO

ME

42

Bond Yields Low, Credit Categories More Fully Valued Exceptionally low interest rates have pushed yields in many fixed-income categories to near-record lows. After a year of significant spread tightening, yield spreads on most categories are now below historical average levels. During the fourth quarter, mortgage-backed security spreads widened back to levels seen prior to the Fed’s third round of quantitative easing.

Past performance is no guarantee of future results. Percentile ranks of yields and spreads based on historical period from 2000 to 2012. MBS = Mortgage-Backed Securities; CMBS = Commercial Mortgage-Backed Securities. All categories represented by respective Barclays bond indices. Source: Barclays as of 12/31/12.

Fixed-Income Yields & Spreads

Yield (%) Yield and Spread Percentiles (%)

Credit Spread Treasury/Rates Spread Percentiles Yield Percentile

3 4 1 2 1 1

37

46 53

37 37

25

0

10

20

30

40

50

60

70

80

90

100

0

1

2

3

4

5

6

7

U.S. Aggregate Bond

MBS CMBS Corporate Investment Grade

Corporate High Yield

Emerging Market Debt

6. F

IXE

D IN

CO

ME

43

Muni Fundamentals Steady, Tax Advantage Increased Although fiscal challenges still exist for many municipalities, state revenues have improved for 11 straight quarters, and the recent uptick in property tax revenues is a positive sign for localities. Recent tax changes for 2013 enhance the after-tax yield advantage of municipals for high-income investors, though muni income could still be affected by future tax initiatives.

Muni Tax-Equivalent Yields

LEFT: Shaded areas are U.S. recessions as defined by National Bureau of Economic Research. Chart represents 4-quarter average of quarterly year-over-year percent change. Data not adjusted for legislative changes. Personal income tax and sales tax represent state portion only, while property tax reflects state and local components. Source: U.S. Census Bureau, Quarterly Summary of State and Local Tax Revenue, Fidelity Investments (AART) as of 12/18/12. RIGHT: 2013 tax equivalent yield uses top federal income tax rate for 2013 (39.6%) and Medicare contribution tax (3.8%) as prescribed by current law. Source: Municipal Market Data – Thomson Reuters, Bloomberg, Fidelity Investments (AART) as of 12/31/12.

0

1

2

3

4

5

6

30-Y

r AAA

Mun

i

30-Y

r Tre

asur

y

10-Y

r AAA

Mun

i

10-Y

r Tre

asur

y

2-Yr

AAA

Mun

i

2-Yr

Tre

asur

y

Yield-to-Maturity Tax-Equivalent Yield 2012 (Max Tax Rate) Tax-Equivalent Yield 2013 (Max Tax Rate)

Yield (%)

-20%

-15%

-10%

-5%

0%

5%

10%

15%

20%

Q3

1999

Q3

2000

Q3

2001

Q3

2002

Q3

2003

Q3

2004

Q3

2005

Q3

2006

Q3

2007

Q3

2008

Q3

2009

Q3

2010

Q3

2011

Q3

2012

Personal Income Tax Sales Tax Property Tax

Tax Revenue Growth

Year-over-Year

QU

ARTE

RLY

MAR

KET

UPD

ATE

Firs

t Qua

rter 2

013

Asset Allocation Themes

7. A

SS

ET

ALL

OC

ATI

ON

Non-Bond Opportunities to Diversify Income Sources High dividend-paying stocks, including non-U.S. equities, have delivered higher risk-adjusted returns and average dividend yields than other equity categories. Combining various non-bond sources of income may create diversification benefits by lowering the potential volatility and raising the expected risk-adjusted return profile of the entire portfolio.

3

4

5

6

7

8

9

10

11

11 16 21 26 Standard Deviation (%)

Portfolio: 50% High Dividend 20% Preferred 15% REITs 15% Convertibles

Average Annualized Return (%)

Past performance is no guarantee of future results. LEFT: High dividend stocks are subsets of their respective indices containing securities with greater than average dividend yields and reasonable dividend per share growth and dividend payouts. Index returns represented by: U.S. Stocks – MSCI USA Index; Non-U.S. Developed-Country Stocks – MSCI EAFE Index; Developed-Country Stocks – MSCI World Index; Global Stocks – MSCI All-Country World Index; Bonds – IA SBBI U.S. Intermediate-Term Government Bond Index. Source: Morningstar EnCorr, Fidelity Investments (AART). Left chart as of 12/31/11. RIGHT: Efficient frontier represents optimal risk-return combinations of four assets. Index returns represented by: High Dividend Stocks – MSCI USA High Dividend Index; Preferred Stocks – BofA ML U.S. Fixed Rate Preferred Securities Index; Real Estate Investment Trusts (REITs) – FTSE NAREIT Equity REIT Index; Convertibles – BofA ML All U.S. Convertibles Index. Portfolio allocation is 50% High Dividend Stocks, 20% Preferred Stocks, 15% Convertibles, and 15% REITs. Source: Morningstar EnCorr, Fidelity Investments (AART) as of 9/30/12.

Dividend Yield and Sharpe Ratio, 2001–2011

1.5%

2.0%

2.5%

3.0%

3.5%

4.0%

4.5%

0.15 0.20 0.25 0.30 0.35 Sharpe Ratio

U.S.

Non-U.S. Developed-

Country Global

Non-U.S. Developed-Country

High Dividend Global High Dividend

U.S. High Dividend

Dividend Yield (Average)

Preferred

High Dividend Convertibles

REITs

Portfolio

Efficient Frontier, 1999–2012

45

7. A

SS

ET

ALL

OC

ATI

ON

-1%

1%

3%

5%

7%

9%

11%

13%

15%

1952

1953

1954

1955

1956

1957

1958

1959

1960

1961

1962

1963

1964

1965

1966

1967

1968

1969

1970

1971

1972

1973

1974

1975

1976

1977

1978

1979

1980

Low Inflation & Yields Low but Rising Inflation & Yields

High and Rising Inflation & Yields

46

Equities: Better Potential to Adjust Upward with Inflation In the current low-inflation and low-yield environment, many investors are paying closer attention to the inflation protection provided by various asset classes. When inflation is rising, fixed-rate bonds have historically struggled, particularly when starting from low interest rates, while equities have tended to hold up better, as stock real returns have remained positive.

Past performance is no guarantee of future results. Stocks represented by total returns of S&P 500 Index including reinvestment of dividends and interest income. Bonds represented by Barclays Aggregate Bond Index for 1/1976–12/1980 and by composite of IA SBBI Intermediate-Term Government Bond Index (67%) and IA SBBI Long-Term Corporate Bond Index (33%) for 1/1952–12/1975. Source: Robert Shiller, Morningstar EnCorr, Fidelity Investments (AART) as of 12/31/12.

Change over Period 1952–1964 1965–1969 1970–1980

Aver

age

% Real Stock Returns 13.2 1.1 0.2

Real Bond Returns 1.6 -3.0 -1.1

Shar

pe

Rat

io Stocks 1.0 0.0 0.1

Bonds 0.2 -1.0 0.0

Avg. 1952–1964 Avg. 1965–1969 Avg. 1970–1980

10-Yr Treasury Yield (%) 3.5 5.3 7.9

Inflation (%) 1.4 3.4 7.8

7. A

SS

ET

ALL

OC

ATI

ON

47

Real Return: Seeking Protection against Inflation While cash has rarely exceeded the rate of inflation over the long run, other investments with hard-asset or income-adjusting characteristics have offered some inflation protection. These asset categories have different inflation sensitivities, so combining them into a real return composite may increase the frequency of outpacing inflation.

Frequency of Exceeding Inflation, 1973–2012

Frequency of exceeding inflation shows percent of trailing 12-month periods each asset class outperformed trailing 12-month change of Consumer Price Index. * Real Return Composite represented by 30% TIPS, 25% Leveraged Loans, 25% Commodities, 10% Real Estate Income, 10% Real Estate Equity. Past performance is no guarantee of future results. You cannot invest directly in an index. Please see appendix for important index information. Index returns represented by: Cash – U.S. 30-day T-bill; Commodities – Goldman Sachs Commodities Index through 12/1990, Dow Jones UBS Commodity Index from 1/1991; TIPS – Fidelity-compiled index through 2/1997, Barclays U.S. TIPS Index from 3/1997; Real Estate Equity – FTSE NAREIT All REITS Index through 12/1977, DJ U.S. Select RESI from 1/1978; Real Estate Income – NAREIT through 12/1996, 40% BofA Merrill Lynch Corporate Real Estate Index / 40% MSCI REIT Preferred / 20% NAREIT from 1/1997; Leveraged Loans – Barclays Intermediate Credit for 1/1973–12/1975, Barclays 1-3 Yr Credit for 1/1976–1/1978, ML 1-3 Corp for 2/1978–12/1991, Credit Suisse Leveraged Loans for 1/1992–1/1999, S&P/LSTA Leveraged Loan from 2/1999. Source: Morningstar EnCorr, Fidelity Investments (AART) through 11/30/12.

39%

66% 69% 71%

79% 80% 85%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Cash Commodities Real Estate Stocks

Real Estate Income

Leveraged Loans

TIPS Real Return Composite*

7. A

SS

ET

ALL

OC

ATI

ON

48

Allocating to Fixed Income: A Multisector Approach Historically low yields on high-quality U.S. bonds suggest that diversifying across a broad spectrum of fixed-income sectors may significantly improve a portfolio’s Sharpe ratio (a measure of risk-adjusted return). Investing in a variety of sectors may also provide opportunities to diversify across risk characteristics, such as inflation resistance or geographic variation.

Portfolio Description

#1

High-quality portfolio with limited risk 80% U.S. Investment Grade

5% U.S. High Yield 5% U.S. Real Estate Debt

5% Leveraged Loans 5% Emerging Market

Portfolio Description

#2

Mix of high yield, government, and foreign 40% U.S. High Yield

30% U.S. Government 15% Foreign Developed 15% Emerging Market

Yield-to-Maturity (%)

Efficient Frontier Using Yield-to-Maturity, 1998–2012

Volatility represented by standard deviation. Past performance is no guarantee of future results. Diversification does not ensure a profit or guarantee against a loss. You cannot invest directly in an index. Please see appendix for important index information. Index returns represented by: U.S. Investment-Grade – Barclays U.S. Aggregate Bond Index; U.S. Government – Barclays U.S. Government Index; U.S. High-Yield – Bank of America Merrill Lynch (BofA ML) High Yield Master II Index; Real Estate Debt – 50% Barclays CMBS Index and 50% BofA ML Corporate Real Estate Index; Leveraged Loans – S&P/LSTA Performing Loan Index; Emerging Market Debt – JP Morgan (JPM) EMBIG Composite Index; Foreign Developed-Country Bonds – Citigroup G-7 non-USD Bond Index. Source: FactSet, Bloomberg, Morningstar EnCorr, Fidelity Investments (AART) as of 12/31/12.

Portfolio Sharpe Ratio

#1 0.66 #2 0.63

U.S. Investment Grade 0.44

0

1

2

3

4

5

6

7

8

0 2 4 6 8 10 12 14 16

U.S. High Yield

Foreign Developed-Country Bonds

Emerging Market Debt #2

Real Estate Debt #1

U.S. Investment Grade U.S. Government

Leveraged Loans

Volatility of Returns (%)

7. A

SS

ET

ALL

OC

ATI

ON

49

Portfolio Rebalancing May Smooth Performance over Time A hypothetical portfolio rebalanced monthly to the asset weights of a long-term investment strategy would have experienced smaller short-term fluctuations and lower long-term volatility than a portfolio with no rebalancing. Monthly rebalancing since 1990 would have kept the portfolio from heavily overweighting equities before the stock market downturns in 2000 and 2008.

Rebalancing vs. No Rebalancing in a 60% Equity / 40% Bond Portfolio

-20

0

20

80

180

280

380

480

580

680

1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Monthly Rebalancing No Rebalancing

Rebalancing No Rebalancing

Average Annual Return 8.2% 8.0% Volatility 10.1% 11.3%

Highest Month 8.0% 7.9% Lowest Month -11.0% -12.1%

Equity Overweight with No Rebalancing (%)

Total Return Index Level (12/31/89 = 100)

For illustrative purposes only. Past performance is no guarantee of future results. Does not account for any potential fees associated with rebalancing or for potential tax implications. Shaded regions denote equity bear markets (declines of >20%). You cannot invest directly in an index. Please see appendix for important index information. Equity represented by S&P 500 Index. Bonds represented by Barclays U.S. Aggregate Bond Index. Volatility represented by standard deviation. Source: Morningstar EnCorr, Haver Analytics, Fidelity Investments (AART) through 12/31/12.

7. A

SS

ET

ALL

OC

ATI

ON

50

Performance Rotations Underscore Need for Diversification The performance of different asset categories has varied widely from year to year, and the magnitude of returns can vary significantly among asset classes in any given year—even among asset classes that are moving in the same direction. A simple portfolio allocation with 60% in U.S. equities and 40% in U.S. bonds illustrates the potential benefits of diversification.

Periodic Table of Returns

Past performance is no guarantee of future results. Diversification/Asset Allocation does not ensure a profit or guarantee against a loss. Asset classes represented by: Large Caps – S&P 500 Index; Small Caps – Russell 2000 Index; Growth – Russell 3000 Growth Index; Value – Russell 3000 Value Index; Foreign Developed -Country – MSCI EAFE Index; Emerging Markets – MSCI Emerging Markets Index; High Yield – Bank of America Merrill Lynch U.S. High Yield Index; Investment-Grade Bonds – Barclays Capital U.S. Aggregate Bond Index; Real Estate – NAREIT Equity Only Index; Commodities – DJ-UBS Commodity Index. Source: Ibbotson Associates, Standard & Poor’s, Haver Analytics, Fidelity Investments (AART) as of 12/31/12.

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Legend

18% 75% 17% 38% 35% 35% 35% 66% 32% 14% 26% 56% 32% 35% 35% 40% 5% 79% 28% 8% 20% Real Estate Stocks

17% 33% 8% 37% 23% 33% 29% 34% 26% 8% 10% 47% 26% 21% 33% 16% -20% 58% 27% 8% 19% Emerging-Market Stocks

15% 20% 3% 37% 23% 29% 21% 27% 12% 5% 4% 39% 21% 14% 27% 12% -26% 37% 19% 4% 18% Foreign Developed-Country

15% 19% 2% 30% 22% 24% 20% 24% 8% 2% -2% 37% 18% 12% 22% 11% -34% 32% 18% 4% 18% Value Stocks

11% 19% 1% 28% 22% 22% 14% 21% -1% -2% -6% 31% 17% 7% 18% 7% -36% 28% 17% 2% 16% Small-Cap Stocks

8% 17% 0% 20% 16% 20% 9% 21% -3% -4% -9% 31% 11% 5% 16% 6% -36% 27% 16% 2% 16% Large-Cap Stocks

8% 10% -1% 18% 15% 13% 3% 12% -5% -4% -15% 29% 11% 5% 12% 5% -37% 26% 15% 0% 16% High-Yield Bonds

7% 10% -2% 15% 11% 10% -3% 7% -9% -12% -16% 28% 9% 5% 11% 2% -38% 20% 15% -4% 15% Growth Stocks

5% 10% -2% 15% 6% 2% -18% 3% -14% -20% -20% 24% 8% 4% 9% -1% -38% 19% 12% -12% 11% 60% Large Cap40% IG Bonds

4% 4% -3% 12% 6% -3% -25% -1% -22% -20% -22% 19% 7% 3% 4% -2% -43% 18% 8% -13% 4% Investment-Grade Bonds

-12% -1% -7% -5% 4% -12% -27% -5% -31% -21% -28% 4% 4% 2% 2% -16% -53% 6% 7% -18% -1% Commodities

51

Appendix: Important Information Views expressed are as of the date indicated, based on the information available at that time, and may change based on market and other conditions. Unless otherwise noted, the opinions provided are those of the authors and not necessarily those of Fidelity Investments or its affiliates. Fidelity does not assume any duty to update any of the information. Investment decisions should be based on an individual’s own goals, time horizon, and tolerance for risk.

These materials are provided for informational purposes only and should not be used or construed as a recommendation of any security, sector, or investment strategy.

Past performance and dividend rates are historical and do not guarantee future results.

Investing involves risk, including risk of loss.

Diversification does not ensure a profit or guarantee against loss.

All indices are unmanaged and performance of the indices includes reinvestment of dividends and interest income and, unless otherwise noted, is not illustrative of any particular investment. An investment cannot be made in any index.

Although bonds generally present less short-term risk and volatility than stocks, bonds do contain interest rate risk (as interest rates rise, bond prices usually fall, and vice versa) and the risk of default, or the risk that an issuer will be unable to make income or principal payments. Additionally, bonds and short-term investments entail greater inflation risk—or the risk that the return of an investment will not keep up with increases in the prices of goods and services—than stocks.

Increases in real interest rates can cause the price of inflation-protected debt securities to decrease.

Stock markets, especially non-U.S. markets, are volatile and can decline significantly in response to adverse issuer, political, regulatory, market, or economic developments. Foreign securities are subject to interest rate, currency exchange rate, economic, and political risks, all of which are magnified in emerging markets.

The securities of smaller, less well-known companies can be more volatile than those of larger companies.

Growth stocks can perform differently from the market as a whole and other types of stocks, and can be more volatile than other types of stocks. Value stocks can perform differently from other types of stocks and can continue to be undervalued by the market for long periods of time.

Lower-quality debt securities generally offer higher yields, but also involve greater risk of default or price changes due to potential changes in the credit quality of the issuer. Any fixed-income security sold or redeemed prior to maturity may be subject to loss.

Fidelity does not provide legal or tax advice and the information provided herein is general in nature and should not be considered legal or tax advice. Consult with an attorney or a tax professional regarding your specific legal or tax situation.

The municipal market can be affected by adverse tax, legislative, or political changes and the financial condition of the issuers of municipal securities. Interest income generated by municipal bonds is generally expected to be exempt from federal income taxes and, if the bonds are held by an investor resident in the state of issuance, state and local income taxes. Such interest income may be subject to federal and/or state alternative minimum taxes. Investing in municipal bonds for the purpose of generating tax-exempt income may not be appropriate for investors in all tax brackets. Generally, tax-exempt municipal securities are not appropriate holdings for tax-advantaged accounts such as IRAs and 401(k)s.

The commodities industry can be significantly affected by commodity prices, world events, import controls, worldwide competition, government regulations, and economic conditions.

The gold industry can be significantly affected by international monetary and political developments, such as currency devaluations or revaluations, central bank movements, economic and social conditions within a country, trade imbalances, or trade or currency restrictions between countries.

Changes in real estate values or economic downturns can have a significant negative effect on issuers in the real estate industry.

Leverage can magnify the impact that adverse issuer, political, regulatory, market, or economic developments have on a company. In the event of bankruptcy, a company’s creditors take precedence over the company’s stockholders.

CPI – Consumer Price Index. An inflationary indicator that measures the change in the cost of a fixed basket of products and services, including housing, electricity, food, and transportation. The CPI is published monthly.

Russell 2000® Index is a market capitalization-weighted index of smaller company stocks. Russell Midcap Index measures the performance of the 800 smallest companies in the Russell 1000 Index, which represent approximately 26% of the total market capitalization of the Russell 1000 Index. Russell 3000® Index is constructed to provide a comprehensive, unbiased, and stable barometer of the broad market and is completely reconstituted annually to ensure new and growing equities are reflected. Russell 3000 Growth Index is an unmanaged index that measures the performance of those Russell 3000 Index companies with higher price-to-book ratios and higher forecasted growth values. Russell 3000 Value Index is an unmanaged index that measures the performance of those Russell 3000 Index companies with lower price-to-book ratios and lower forecasted growth values. Russell Top 200 Index measures the performance of the largest cap segment of the U.S. equity universe; a subset of the Russell 3000® Index, Russell Top 200 includes approximately 200 of the largest securities based on a combination of their market cap and current index membership, and represents approximately 68% of the U.S. market. Russell 1000 Index measures the performance of the large-cap segment of the U.S. equity universe; a subset of the Russell 3000® Index, Russell 1000 includes approximately 1000 of the largest securities based on a combination of their market cap and current index membership, and represents approximately 92% of the U.S. market.

MSCI® Europe, Australasia, Far East Index (EAFE) is an unmanaged market capitalization-weighted index designed to represent the performance of developed stock markets outside the United States and Canada. MSCI Emerging Markets (EM) Index is a market capitalization-weighted index of over 850 stocks traded in 22 world markets. MSCI EM (Emerging Markets) Europe, Middle East, and Africa (EMEA) Index is a free float-adjusted, market capitalization-weighted index designed to measure equity market performance in the emerging-market countries of Europe, the Middle East, and Africa; it consists of the following 10 emerging-market country indices: Czech Republic, Hungary, Poland, Russia, Turkey, Israel, Jordan, Egypt, Morocco, and South Africa. MSCI EM (Emerging Markets) Latin America Index is a free float-adjusted, market capitalization-weighted index designed to measure equity market performance in Latin America. MSCI EM Latin America Index consists of the following six emerging-market country indices: Argentina, Brazil, Chile, Colombia, Mexico, and Peru. MSCI EM (Emerging Markets) Asia Index is a free float-adjusted, market capitalization-weighted index designed to measure equity market performance in the following countries: China, India, Indonesia, Korea, Malaysia, Philippines, Taiwan, and Thailand.

MSCI Europe Index is a free float-adjusted, market capitalization-weighted index designed to measure equity market performance in the following countries: Austria, Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Netherlands, Norway, Portugal, Spain, Sweden, Switzerland, United Kingdom. MSCI Japan Index is an unmanaged index of stock prices that reflects the common stock prices of the index companies translated into U.S. dollars, assuming reinvestment of all dividends paid by the index stocks net of any applicable non-U.S. taxes. MSCI Canada Index is a free float-adjusted, market capitalization-weighted index designed to measure equity market performance in Canada. MSCI Turkey Index is a free float-adjusted, market capitalization-weighted index designed to measure equity market performance in Turkey. MSCI Egypt Index is a free float-adjusted, market capitalization-weighted index designed to measure equity market performance in Egypt. MSCI Germany Index is a free float-adjusted, market capitalization-weighted index designed to measure equity market performance in Germany. MSCI Mexico Index is a free float-adjusted, market capitalization-weighted index designed to measure equity market performance in Mexico. MSCI India Index is a free float-adjusted, market capitalization-weighted index designed to measure equity market performance in India. MSCI China Index is a free float-adjusted, market capitalization-weighted index designed to measure equity market performance in China. MSCI France Index is a free float-adjusted, market capitalization-weighted index designed to measure equity market performance in France. MSCI Australia Index is a free float-adjusted, market capitalization-weighted index designed to measure equity market performance in Australia. MSCI Korea Index is a free float-adjusted, market capitalization-weighted index designed to measure equity market performance in Korea. MSCI South Africa Index is a free float-adjusted, market capitalization-weighted index designed to measure equity market performance in South Africa. MSCI U.K. Index is a free float-adjusted, market capitalization-weighted index designed to measure equity market performance in U.K. MSCI Malaysia Index is a free float-adjusted, market capitalization-weighted index designed to measure equity market performance in Malaysia. MSCI Russia Index is a free float-adjusted, market capitalization-weighted index designed to measure equity market performance in Russia. MSCI Spain Index is a free float-adjusted, market capitalization-weighted index designed to measure equity market performance in Spain. MSCI Brazil Index is a free float-adjusted, market capitalization-weighted index designed to measure equity market performance in Brazil. MSCI Hungary Index is a free float-adjusted, market capitalization-weighted index designed to measure equity market performance in Hungary.

MSCI EAFE Small Cap Index currently consists of the following 21 developed-market countries: Australia, Austria, Belgium, Denmark, Finland, France, Germany, Greece, Hong Kong, Ireland, Italy, Japan, Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland, and United Kingdom. This index aims to capture 40% of the full market capitalization of the eligible small-cap universe of companies in each country by industry. This is a range of 200–1500 billion USD. MSCI then free-float adjusts the included companies.

MSCI All Country World Index (ACWI) is a free float-adjusted, market capitalization-weighted index designed to measure the equity market performance of developed and emerging markets. The countries included in the index are: Australia, Austria, Belgium, Brazil, Canada, Chile, China, Colombia, Czech Republic, Denmark, Egypt, Finland, France, Germany, Greece, Hong Kong, Hungary, India, Indonesia, Ireland, Israel, Italy, Japan, Korea, Malaysia, Mexico, Morocco, Netherlands, New Zealand, Norway, Peru, Philippines, Poland, Portugal, Russia, Singapore, South Africa, Spain, Sweden, Switzerland, Taiwan, Thailand, Turkey, United States, United Kingdom. MSCI World Index is a free float-adjusted, market capitalization-weighted index designed to measure the equity market performance of developed markets. MSCI USA Index is a free float-adjusted, market capitalization-weighted index designed to measure the equity market performance of the United States. MSCI USA High Dividend Index is an unmanaged index that tracks the performance of U.S. high-dividend-yield equities.

52

Appendix: Important Information

S&P GSCI Commodities Index is a world production-weighted index composed of 24 widely traded commodities. All sub-indices of the S&P GSCI™ sub-indices (Energy, Industrial Metals, Precious Metals, and Agriculture and Livestock) follow the same rules regarding world production weights, methodology for rolling, and other functional characteristics.

Dow Jones-UBS Commodity Index measures the performance of the commodities market. It consists of exchange-traded futures contracts on physical commodities that are weighted to account for the economic significance and market liquidity of each commodity.

Barclays® U.S. Treasury Index is designed to cover public obligations of the U.S. Treasury with a remaining maturity of one year or more. Barclays® U.S. Government Index is designed to cover public obligations of the U.S. Government with a remaining maturity of one year or more. Barclays U.S. Aggregate Bond Index is an unmanaged, market value-weighted performance benchmark for investment-grade fixed-rate debt issues, including government, corporate, asset-backed, and mortgage-backed securities with maturities of at least one year. Barclays U.S. Credit Bond Index is designed to cover publicly issued U.S. corporate and specified non-U.S. debentures and secured notes that meet the specified maturity, liquidity, and quality requirements; bonds must be SEC-registered to qualify. Barclays U.S. Agency Index is designed to cover publicly issued debt of U.S. government agencies, quasi-federal corporations, and corporate or non-U.S. debt guaranteed by the U.S. Government. Barclays CMBS Index is designed to mirror commercial mortgage-backed securities of investment-grade quality (Baa3/BBB-/BBB- or above) using Moody’s, S&P, and Fitch, respectively, with maturities of at least one year. Barclays MBS Index covers agency mortgage-backed pass-through securities (both fixed-rate and hybrid ARMs) issued by Ginnie Mae (GNMA), Fannie Mae (FNMA), and Freddie Mac (FHLMC). Barclays U.S. Municipal Bond Index covers the U.S. dollar-denominated, long-term tax-exempt bond market with four main sectors: state and local general obligation bonds, revenue bonds, insured bonds, and pre-refunded bonds. Barclays U.S. TIPS Index is an unmanaged market index made up of U.S. Treasury Inflation-Protected Securities. Barclays U.S. Government Bond Index is a market value-weighted index of U.S. government fixed-rate debt issues with maturities of one year or more. Barclays ABS Index is a market value-weighted index that covers fixed-rate asset-backed securities with average lives greater than or equal to one year and that are part of a public deal; the index covers the following collateral types: credit cards, autos, home equity loans, stranded-cost utility (rate-reduction bonds), and manufactured housing. Barclays Long U.S. Government Credit Index includes all publicly issued, U.S. government and corporate securities that have a remaining maturity of 10 or more years, are rated investment grade, and have $250 million or more of outstanding face value. Barclays U.S. Intermediate Credit Bond Index is a market value-weighted index of investment-grade fixed-rate corporate debt and sovereign, supranational, local authorities, and non-U.S. agency debt with intermediate range maturities. Barclays U.S. 1–3 Year Credit Bond Index is a market value-weighted index of investment-grade fixed-rate debt securities with maturities from one to three years from the U.S. Corporate Indices.

JPM® EMBI Global Index , and its country sub-indices, tracks total returns for traded external debt instruments issued by emerging-market sovereign and quasi-sovereign entities.

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.

S&P 500 sectors are defined as follows: 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 services and equipment, including seismic data collection; the exploration, production, marketing, 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, or 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 fixed line, cellular, wireless, high bandwidth, and/or fiber-optic cable networks. Utilities – Companies considered electric, gas, or water utilities, or companies that operate as independent producers and/or distributors of power.

Bank of America Merrill Lynch (BofA ML) U.S. Fixed Rate Preferred Securities Index is an unmanaged index that tracks the performance of fixed-rate preferred securities publicly issued in the U.S. domestic market. BofA ML All U.S. Convertibles Index is an unmanaged index that tracks the performance of all U.S. convertible securities. BofA ML High Yield Bond Master II Index is an unmanaged index that tracks the performance of below-investment-grade, U.S. dollar-denominated corporate bonds publicly issued in the U.S. domestic market. BofA ML Corporate Real Estate Index, a subset of BofA Merrill Lynch U.S. Corporate Index, is a market capitalization-weighted index of U.S. dollar-denominated investment-grade corporate debt publicly issued in the U.S. domestic market by real estate issuers. Qualifying securities must have an investment-grade rating (based on an average of Moody’s, S&P, and Fitch). In addition, qualifying securities must have at least one year remaining to final maturity, a fixed coupon schedule, and a minimum amount outstanding of $250 million. BofA ML 1–3 Year Corporate Index is a market value-weighted index of investment-grade fixed-rate debt securities with maturities from one to three years.

53

Appendix: Important Information

54

Appendix: Important Information S&P/LSTA Leveraged Performing Loan Index (Standard & Poor's/Loan Syndications and Trading Association Leveraged Performing Loan Index) is a market value-weighted index designed to represent the performance of U.S. dollar-denominated, institutional leveraged performing loan portfolios (excluding loans in payment default) using current market weightings, spreads, and interest payments.

CBOE Volatility Index (VIX) is based on the prices of eight S&P 500 Index put and call options.

IA SBBI U.S. Intermediate-Term Government Bond Index is a custom index designed to measure the performance of intermediate-term U.S. government bonds. IA SBBI U.S. Long-Term Government Bond Index is a custom index designed to measure the performance of long-term U.S. corporate bonds.

FTSE NAREIT Equity REIT Index – The unmanaged National Association of Real Estate Investment Trusts (NAREIT) Equity Index is a market value-weighted index based on the last closing price of the month for tax-qualified REITs listed on the NYSE. FTSE NAREIT All REITs Index is a market capitalization-weighted index that is designed to measure the performance of all tax-qualified Real Estate Investment Trusts (REITs) that are listed on the New York Stock Exchange, the American Stock Exchange, or the NASDAQ National Market List.

MSCI REIT Preferred Index is a preferred stock market capitalization-weighted index of certain exchanged-traded perpetual preferred securities issued by U.S. Equity and U.S. Hybrid REITS.

Citigroup Non-USD Group-of-Seven (G7) Index is designed to measure the unhedged performance of the government bond markets of the Group of 7, excluding the U.S., which are Japan, Germany, France, Britain, Italy, and Canada. Issues included in the index have fixed-rate coupons and maturities of one year or more.

Dow Jones U.S. Select Real Estate Securities Index is a float-adjusted market capitalization-weighted index of publicly traded real estate securities, such as real estate investment trusts (REITs) and real estate operating companies (REOCs).

Credit Suisse Leveraged Loan Index is a market value-weighted index designed to represent the investable universe of the U.S. dollar-denominated leveraged loan market.

S&P Global BMI Gold Index consists of securities classified under the GICS ® Gold sub-industry and is composed of both producers of gold and related products. The index also tracks the performance of companies that mine or process gold and the South African finance houses that primarily invest in, but do not operate, gold mines.

Purchasing Managers’ Index (PMI) is a survey of purchasing managers in a certain economic sector. A PMI over 50 represents expansion of the sector compared to the previous month, and under 50 represents a contraction, while a reading of 50 indicates no change. The Institute for Supply Management (ISM) reports U.S. PMIs; Markit compiles non-U.S. PMIs.

Cyclically Adjusted Price-to-Earnings (CAPE) ratio was developed in the late 1990s by Yale professor Robert Shiller and Harvard professor John Campbell.

Standard deviation shows how much variation there is from the average (mean or expected value). A low standard deviation indicates that the data points tend to be very close to the mean, whereas a high standard deviation indicates that the data points are spread out over a large range of values.

Correlation coefficient measures the interdependencies of two random variables that range in value from −1 to +1, indicating perfect negative correlation at −1, absence of correlation at 0, and perfect positive correlation at +1.

Sharpe Ratio compares portfolio returns above the risk-free rate relative to overall portfolio volatility. A higher Sharpe Ratio implies better risk-adjusted returns.

Payout ratio is the dividend paid out over the year divided by the earnings over the year. A low payout ratio indicates dividend growth potential, while a high payout ratio indicates less cash to increase dividends.

The Economic Policy Uncertainty Index is composed of three underlying components. The first component quantifies newspaper coverage of policy-related economic uncertainty. The second component reflects the number of federal tax code provisions set to expire in future years. The third component uses disagreement among economic forecasters as a proxy for uncertainty.

S&P/Case-Shiller® Home Price Indices are designed to be a reliable and consistent benchmark of housing prices in the United States. Their purpose is to measure the average change in home prices in a particular geographic market. They track house prices in 20 major U.S. cities: Boston, Chicago, Denver, Las Vegas, Los Angeles, Miami, New York, San Diego, San Francisco, Washington D.C., Atlanta, Charlotte, Cleveland, Dallas, Detroit, Minneapolis, Phoenix, Portland, Seattle, and Tampa.

The Real Estate Climate Index was developed by China National Bureau of Statistics based on the monthly statistics of China real estate development; this composite index is calculated by eight indicators related to the three aspects (land, capital, and sales) of the real estate market, and thus describes the situation and trend of the real estate market in China. Its critical point is 100, which is seen as a definition between depression (<100) and prosperity (>100).

The MSCI USA Investable Market Index (IMI) include large, mid-cap, and small-cap segments and provides exhaustive coverage of these size segments by targeting a coverage range of close to 99% of the free float-adjusted market capitalization in each market.

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Products and services are provided through Fidelity Financial Advisor Solutions (FFAS) to investment professionals, plan sponsors, and institutional investors by Fidelity Investments Institutional Services Company, Inc., 500 Salem Street, Smithfield, RI 02917.

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Appendix: Important Information