Stable Value Industry overview and Fidelity key differentiators Second Quarter 2021 For institutional use only. Agenda 1. Stable Value Industry Overview 2. Fidelity Stable Value and its Key Differentiators 3. Fidelity Characteristics, Fees and Availability 4. Appendix A. Fidelity Pool Performance, Characteristics and Wrap Details B. Important Additional Information This document does not make an offer or solicitation to buy or sell any securities or services, and is not investment advice. FIAM does not provide legal or tax advice and we encourage you to consult your own lawyer, accountant, or other advisor before making an investment. Information provided in this document is for informational and educational purposes only. To the extent any investment information in this material is deemed to be a recommendation, it is not meant to be impartial investment advice or advice in a fiduciary capacity and is not intended to be used as a primary basis for you or your client’s investment decisions. Fidelity and its representatives may have a conflict of interest in the products or services mentioned in this material because they have a financial interest in them, and receive compensation, directly or indirectly, in connection with the management, distribution, and/or servicing of these products or services, including Fidelity funds, certain third-party funds and products, and certain investment services. See “Important Information” for a discussion of performance data, some of the principal risks related to any of the investment strategies referred to in this presentation, professional designations and how they are obtained, and other information related to this presentation. 2 For institutional use only. Stable Value Industry Overview For institutional use only. Stable Value is a Key Component of DC Plans Asset Class is Estimated To Be $904B in AUM* STABLE VALUE AUM Sep Acct (synthetic) Pool (synthetic) Gen & Sep Acct (Fixed Annuity) Gen Acct (Fixed Annuity) Sep Acct (Fixed Annuity) $1,000,000 $900,000 Stable value is a fundamental $800,000 component of defined contribution plans that seeks: $700,000 • Principal protection $600,000 • The potential for steady, predictable returns consistent with a conservative $500,000 principal protection vehicle $400,000 • The potential to outperform money $300,000 market funds over time $200,000 $100,000 $0 YTD 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 *Source: SVIA, as of 3/31/21. 4 For institutional use only. Optimal Plan Design A Simplified Approach to Investment Menu Design—Diversification with Fewer Choices DEFAULT Professionally-managed asset allocation and investment management solutions for accumulators (savers) and those in retirement (decumulators). INVESTMENTS Accumulators: TDF and/or WMA Decumulators: TDF, WMA, and/or Multi-asset retirement income A diversified core investment menu for participants who wish to construct their own portfolios. CORE MENU These options will also be available to managed account providers (if applicable). Bonds Domestic Equity International Inflation Domestic Real Capital Short Intermediate Equity Protection Estate Other Value Core Growth Preservation Duration Duration Money Market Short-Term Intermediate Core Large Large Large Multi-Asset Real Total Int'l Equity or Stable Value Bond Plus Bond Value Core Growth Return Intermediate Mid Government Core Small Core Opportunistic U.S. Equity EXTENDED May only be available to managed account providers only. Professional managers may take advantage ASSET CLASSES of diversification opportunities from select additional asset classes, but risk of poor investment high for lay person. Bonds Domestic Equity International Inflation Domestic Real Capital Short Intermediate Equity Protection Estate Other Value Core Growth Preservation Duration Duration Money Market or Short-Term Intermediate Core High Large Large Large Multi-Asset Real Real Estate (REITS Total Int'l Equity Stable Value Bond Plus Bond Yield Value Core Growth Return or private equity) Intermediate Long Mid Developed Int'l TIPS Government Treasury Core Equity Small Emerging Market Core Equity Opportunistic U.S. Equity SELF-DIRECTED Expanded choice from self-directed brokerage for more experienced and knowledgeable participants. Should be accompanied by extensive investor education. BROKERAGE OTHER ESG investment options, weighing active vs. passive CONSIDERATIONS RETIREMENT Investment products designed to produce steady income. Guaranteed and non-guaranteed options. Target date funds INCOME Source: Fidelity Research Institute: A Simplified Framework for Investment Menus, Stephen Beck, CFA and Vipul Gautam, as of 12/31/18. 5 For institutional use only. Stable Value Industry A comparison of common DC fixed income options VOLATILITY OF MONTHLY RETURNS (12/31/00–12/31/20) GROWTH OF $1 (12/31/00–12/31/20) Stable Value Money Market Intermediate Bond Stable Value Money Market Intermediate Bond 4% $2.40 $2.32 3% $2.20 2% $2.20 $2.00 1% $1.80 0% $1.60 Monthly Returns -1% $1.40 -2% $1.28 -3% $1.20 -4% $1.00 Dec-00 Dec-01 Dec-02 Dec-03 Dec-04 Dec-05 Dec-06 Dec-07 Dec-08 Dec-09 Dec-10 Dec-11 Dec-12 Dec-13 Dec-14 Dec-15 Dec-16 Dec-17 Dec-18 Dec-19 Dec-20 Dec-00 Dec-01 Dec-02 Dec-03 Dec-04 Dec-05 Dec-06 Dec-07 Dec-08 Dec-09 Dec-10 Dec-11 Dec-12 Dec-13 Dec-14 Dec-15 Dec-16 Dec-17 Dec-18 Dec-19 Dec-20 You could lose money by investing in a money market fund. An investment in a money market fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Before investing, always read a money market fund’s prospectus for policies specific to that fund. Source: SVIA and Fidelity as of 12/31/20. “Stable Value” is a simulation of book value returns in a hypothetical fund holding intermediate bonds and stable value wrap contracts, with crediting interest rates reset monthly using the industry accepted crediting rate formula. The bond returns incorporated into the simulation are monthly market value returns from the Barclays Intermediate Government/Credit Bond Index, with gains/losses reflected in future crediting rates by amortizing market-vs.-book values over intermediate bond index durations. This simulation incorporates no ongoing cash flows into or out of the fund. Returns illustrated are gross before any fees. “Money Market Funds” is a simulation of money market returns from the iMoneyNet MFR Money Funds Index. Returns illustrated are gross before any fees. ”Intermediate Bonds” is a simulation of market value bond fund returns from the Barclays Intermediate Government/Credit Bond Index. Returns illustrated are gross before any fees. Returns illustrated are gross before any fees. Disclaimer: The performance data shown represents past performance, which is not a guarantee of future results. Current performance may be lower or higher than the performance data cited. The performance of an index is not an exact representation of any particular investment, as you cannot invest directly in an index. 6 For institutional use only. Wrap Contracts Allow For Book Value Accounting Smoothing of Returns Executed through Crediting Rate Book Value Market Value Falling • Market value of underlying interest rates investments fluctuate Market Value • But a stable value of underlying investment option’s assets typically grow at a more constant rate Asset Value Rising interest rates Time For illustrative purposes only. Source: SVIA. 7 For institutional use only. Stable Value Industry Common Industry Vehicles and Characteristics Synthetic GIC Fixed Annuity (Commingled Pool or Separate Acct) Separate Account Annuity Structure General Account Annuity Structure Manager Type • Investment Advisor • Insurance Company • Insurance Company Asset Ownership • Plan • Insurance Co (held in separate account) • Insurance Co (held in general account) • Reset periodically (may offer contract min • Reset periodically (may offer contract min Contract Rate • Reset monthly (0% minimum floor) rate) rate) Wrap Diversification • Multiple • Single • Single • 401(k), 401 (a), 403 (b) church and 457 (b) Plan Eligibility • All plans (subject to plan underwriting) • All plans (subject to plan underwriting) governmental plans • Pool - Put period (full payment at book • Termination period (installments at book Termination value) • Market value value) • Sep Acct – Market Value Fees • Transparent • Transparent • Less Transparent • Asset management fee • Asset management fee • Insurance company contract fee and management fee combined, not often • Wrap contract fee • Insurance company contract fee disclosed • Typically have share class structure with RK • Typically have RK offset available • Typically have RK offset available offset available 8 For institutional use only. Fidelity Stable Value and Its Key Differentiators For institutional use only. Fidelity Limited Term Bond Team Dedicated and experienced team offering diverse strategies LOW DURATION SHORT/STABLE VALUE LIMITED TERM INTERMEDIATE TERM STRATEGIES Bloomberg Barclays® 80% Bloomberg Barclays® 1–5 Bloomberg Barclays® Portfolio Bloomberg Barclays® 1–3 and U.S. 3–6 Month Credit/20% Bloomberg Intermediate Benchmark 1–5 Government Credit Treasury Bill Index Barclays® 1–5 Government Government Credit Duration 1 year or less 1.5 years to 3 years Less than 3 years Less than 5 years Primarily investment grade: Primarily investment grade: Primarily investment grade: Primarily investment grade: Quality* 0% below investment grade 0% below investment grade 5% below investment grade 10% below investment