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August 2020 Outcome-Oriented Thematic Investing Chris Peixotto Pranay Kirpalani Zach Dewhirst VP, Investment Product Portfolio Manager Portfolio Manager 1 Table of Contents Thematic Investing at Fidelity Infrastructure Investing Low Volatility Investing 2 Thematic Investing at Fidelity What is thematic investing? Thematic investing at Fidelity allows you to invest directly in long-term trends and themes that best align with your interests or objectives, while accessing Fidelity's differentiated investment research and portfolio management expertise. Disruption Megatrends Outcome oriented Environmental, Differentiated Emerging industries Secular trends Outcomes based on social, and corporate insights and technologies that affecting our world specific objectives governance (ESG) Unique insights and are changing the Return with a purpose industry-leading status quo investment experience Get exposure to long-term trends and themes with our innovative and differentiated investment strategies Gain access to Fidelity’s research and portfolio management expertise Put our thought leadership insights to work for you 3 Thematic Fund Lineup Comprehensive suite of thematic funds comprised of distinct sub-categories Disruption Megatrends Outcome oriented ESG Differentiated insights • Fidelity Disruptive Automation • Fidelity Agricultural Productivity • Fidelity Dividend ETF for Rising • Fidelity International • Fidelity Enduring Opportunities Fund (FBOTX) NEW Fund (FARMX) NEW Rates (FDRR) Sustainability Index Fund Fund (FEOPX) NEW (FNIDX) • Fidelity Disruptive • Fidelity Water Sustainability • Fidelity Global Commodity • Fidelity Founders Fund (FIFNX) Communications Fund Fund (FLOWX) NEW Stock Fund (FFGCX) • Fidelity Select Environment & (FNETX) NEW Alternative Energy Fund • Fidelity Leveraged Company • Fidelity Infrastructure Fund (FSLEX) Stock Fund (FLVCX) • Fidelity Disruptive Finance Fund (FNSTX) NEW (FNTEX) NEW • Fidelity Sustainability Bond • Fidelity Low Volatility Factor Index Fund (FNDSX) • Fidelity Disruptive Medicine ETF (FDLO) Fund (FMEDX) NEW • Fidelity U.S. Sustainability Index • Fidelity Select Natural Fund (FITLX) • Fidelity Disruptive Technology Resources Portfolio (FNARX) Fund (FTEKX) NEW • Fidelity Women’s Leadership • Fidelity Strategic Real Return Fund (FWOMX) • Fidelity Disruptors Fund Fund (FSRRX) (FGDFX) NEW • Fidelity Stocks for Inflation ETF (FCPI) NEW • Fidelity U.S. Low Volatility Equity Fund (FULVX) NEW 4 Fidelity Infrastructure Fund (FNSTX) Pranay Kirpalani, Portfolio Manager 5 What Is Infrastructure? Diversified exposure to long-lived assets in monopoly-like businesses Energy Storage & Transportation Transportation Gathering & Processing Toll Roads Utilities Airports Electric & Gas Utilities Marine Ports Renewable Electricity Railroads Water TRADITIONAL INFRASTRUCTURE INDUSTRIES INFRASTRUCTURE ASSET CLASS NEWER INFRASTRUCTURE-RELATED INDUSTRIES Network Storage Facilities Infrastructure Warehouses Data Centers Distribution Centers Logistics Facilities Communications Satellites Towers 6 Why Invest in Infrastructure? COMPETITIVE RISK-ADJUSTED RETURNS Over time, infrastructure assets have provided investors with competitive risk-adjusted returns relative to other asset classes. SUSTAINABLE INCOME STREAM The “local monopoly” nature of most infrastructure assets combined with long-duration contracts may create a sustainable and reliable income stream for investors. LOWER ECONOMIC SENSITIVITY The inelastic nature of the demand for infrastructure services and products causes the asset class to have low economic sensitivity, which can help provide downside protection in turbulent economic environments. INFLATION PROTECTION Many infrastructure stocks have inflation-linked pricing in their revenue contracts, which can help them do particularly well in periods of unexpected inflation. DIVERSIFICATION The asset class lends itself to active management due to the diversified opportunity set across regions and types of businesses. Diversification does not ensure a profit or guarantee against a loss. The infrastructure industries can be significantly affected by general economic trends; fluctuations in energy and commodity prices; supply and demand of services or fuel; interest rate changes; financing difficulties; natural resource conservation; labor relations; legislation; taxes; government regulation and spending; geopolitical 7 developments; import controls; worldwide competition; and liability for environmental damage, depletion of resources, and mandated expenditures for safety and pollution control. Infrastructure Has Offered an Attractive and Sustainable Yield Infrastructure has provided an attractive yield for investors relative to other asset classes with lower risk than many other equity asset classes 5% 2020) - Real Estate Equities Global Infrastructure 4% 3% EM Equities Investment Grade Global Equities 2% Domestic Equities 15Y Median Annual DividendYield (2005 Annual Median 15Y 1% 0% 5% 10% 15% 20% 25% 15Y Annualized Standard Deviation Source: Bloomberg, Factset, Fidelity Investments, as of 7/31/20. Domestic Equities: S&P 500; Global Equities: MSCI All Country World; Emerging Markets: MSCI EM; Real Estate: DJ US Real 8 Estate; Infrastructure: S&P Global Infrastructure; Investment Grade: Barclays US Agg Bond Infrastructure Relative Yield is Attractive Today The income yield from infrastructure is attractive today relative to the yield from traditional bond instruments Spread Between Infrastructure Dividend Yield and Blended 10 Year Treasury* 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0% -1.0% -2.0% -3.0% 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Source: Bloomberg as of 07/31/20 9 *Blended 10 Year Treasury: Based on geographic allocation of the S&P Global Infrastructure Index Infrastructure Has Historically Performed Well in Periods of Unexpected Inflation Inflation protection in long-dated infrastructure contracts enables companies to protect their earnings and income streams when inflation surprises to the upside MEDIAN ASSET RETURNS IN PERIODS OF UNEXPECTED INFLATION 6.0% 5.1% 5.0% 4.0% 3.2% 3.0% 2.0% 1.6% 1.0% 0.0% S&P Global Infrastructure MSCI AC World Barclays Global Bonds 10 Source: Bloomberg, Philadelphia Fed one-year-ahead Inflation forecasts, Fidelity Investments, as of 06/30/20. Investment Philosophy Investing in infrastructure securities that are best-of-breed and/or exposed to secular mega- ◼ trends, which should help drive higher stability, earnings growth, and dividend growth versus the index Focusing on high-quality infrastructure assets may provide an attractive and sustainable ◼ income yield backed by secure, long-duration cash flow streams Infrastructure is a far more dynamic asset class than traditional benchmarks may portray, ◼ and owning exposure to innovative infrastructure related sectors like renewables, towers, data centers, and warehousing should position us to embrace the trends of tomorrow 11 Source: Fidelity Investments. Thematic Opportunities in Infrastructure Renewable Energy • Renewable energy, which includes wind and solar, is forecasted to grow from approximately 10% of energy generation today to nearly 40% in 2030 • Renewable energy generation in the U.S. has doubled since 2008 as it becomes more accessible and as coal and nuclear plants continue to close • Companies that can embrace energy efficiency may benefit from a secular transition from coal and other traditional sources to renewable energy Current U.S. Energy Mix Projected U.S. Energy Mix in 2030 Coal Natural Gas Nuclear Hydro Renewables Coal Natural Gas Nuclear Hydro Renewables 10% 10% 9% 28% 39% 29% 19% 34% 9% 13% 12 Sources: eei.com, Fidelity Investments as of Nov.1 2019 Thematic Opportunities in Infrastructure Data Centers • Data centers are centralized locations where computing and networking equipment is concentrated in order to collect, process and store large amounts of data • Global internet traffic is expected to continue to grow at a 26% compounded annual growth rate and will have increased 127x from 2005-2021 • The number giant data centers built for “hyperscale” firms like Amazon is expected to increase by 50% through 2021 396 400 Global Internet Traffic Expected to Nearly Triple from 2017-2022 350 319 300 254 250 201 200 156 150 122 Exabytes per month 100 50 0 2017 2018 2019 2020 2021 2022 Exabyte: Unit of digital information storage used to denote size of data. Equivalent to 1 billion gigabytes 13 Source: Cisco VNI Global IP Forecast, 2017-2022 Thematic Opportunities in Infrastructure Warehouses & Logistics • Industrial REITs, which includes warehouses and logistics facilities, are a critical part of the global commerce and trade ecosystem • Growth of these facilities and their importance in global economy is being driven in part by secular trends such as e-commerce • Companies with high quality facilities in the most strategically important geographic areas may have the chance to outperform $6.0 20% 17.5% 18% $5.0 15.5% 16% 13.7% 14% $4.0 11.9% 12% $3.0 10% ($Trillions) $4.9 8% $2.0 $4.1 $3.5 6% $2.8 4% $1.0 Worldwide eCommerce retail salesretaileCommerceWorldwide 2% Share of total worldwide retailtotalsalesworldwide ofShare $- 0% 2018 2019 2020 2021 Worldwide eCommerce retail sales Share of total worldwide retail sales 14 Source: eMarketer as of 2018 Outlook and Opportunities Outlook Opportunities • We believe infrastructure is an attractive • Focusing on best-of-breed firms with a track equity asset class for investors record of sustainable earnings and dividend growth • The asset
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