The Cash Manager's Survival Guide...The European Financial Stability Facility (EFSF) becomes fully operational Dec 2010 European Council and IMF agree to provide €85 billion to Ireland

For institutional client use only

The Cash Manager's Survival GuideAre You Equipped for Unprecedented Volatility?

May 2012

Not FDIC insured. May lose value. No bank guarantee.

Michael Morin, CFA®Director of Institutional Portfolio Management, Liquidity Management Solutions Fidelity Investments

Formulating the Survival Guide

I. Establish / update an investment policy

II. Analyze projected cash flows

III. Establish an investment strategy

IV. Identify and build counterparty relationships

V. Monitor and assess risks (Know what you own)

VI. Modify / update the survival guide (Maintain flexibility)

1© 2012 FMR LLC. All rights reserved



Assessing Risk: Current Market Conditions

© 2012 FMR LLC. All rights reserved


For institutional client use onlySource: Federal Reserve Board as of 1/25/12

Fed Maintains Highly Accommodative Monetary Policy

Federal Reserve Board Rate Expectations

Financial Spreads Experience Recent Volatility

4Source: Barclay’s and FMR as of 3/31/12For Institutional Use Only© 2012 FMR LLC. All rights reserved.

3-MONTH LIBOR VS. 3-MONTH TREASURIES

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5 For Institutional Use Only

Short-Term Credit Spreads Stabilize

Past performance is no guarantee of future results. It is not possible to invest directly in an index. Index performance is not meant to represent that of any Fidelity mutual fund.Source: Bloomberg as of 3/31/12

TED Spread High:10/10/08: 464 bps

TED Spread Low:3/16/10: 11 bps TED Spread Current:

3/31/12: 40 bps

© 2012 FMR LLC. All rights reserved.


May 2011

European Council approves €78 billion bailout program for Portugal

March 2011

European Banking Authority publishes provisional details of second EU-wide bank stress test with results expected to be released in July 2011

Apr 2011

Portugal asks for a bailout

European Central Bank raises policy rate 25 basis points to 1.25%

Dec 2009

Statement by Commissioner Almuniaon Greece:

"We take note of the fact that the sustainability of public finances in Greece draws the attention of financial markets and rating agencies."

Jan 2010

Eurostat report on Greek deficit and debt statisticsquestions the reliability of Greek figures in general and recent Greek revisions of excessive deficit procedure notifications

Feb 2010

European Commission adopts recommendations to ensure that the budget deficit of Greece was to be brought below 3% of GDP by 2012

May 2010

ECB and IMF agree to€110B Greek bailout

€440B European Financial Stability Facility (EFSF) established

Additional funding through IMF bilateral loans brings total support to €860B

July 2010

Committee of European Banking Supervisors (CEBS) announces results of first European bank stress test of which seven banks failed

Aug 2010

The European Financial Stability Facility (EFSF) becomes fully operational

Dec 2010

European Council and IMF agree to provide €85 billion to Ireland

The EC agrees to replace EFSF with European Stability Mechanism (ESM)

European Debt Crisis – A Timeline of Events

Source: FMR, European Economic and Financial Affairs as of 2/29/12

July 2011

Greece receives 5th

installment (€12 B) of original € 110B bailout

Discussions begin for additional €100B bailout

EBA releases results of second stress test

June 2011

Greek Prime Minister George Papandreou receives vote of confidence and €78B of austerity approved


Dec 2011

ECB cuts overnight refinancing rate 25 basis points to 1.00%

Euro area holds summit and agrees to more consolidated fiscal union,

Oct 2011

European Council and Euro area hold summit to discuss fiscal unity and integration of the Euro area

Nov 2011

Italian 10-year bond yields soar to 7%

Greek President Papandreou replaced by Lucas Papademos

ECB President Claude Trichet replaced by Mario Draghi

Aug 2011

French President Sarkozy and German Chancellor Merkel propose common efforts to strengthen the governance of the euro area

Dec 2011

ECB provides banks with €489B of 3-year loans through LTRO

6

Feb – Mar 2012

ECB provides second LTRO installment

Greece receives second bailout through Private Sector Involvement

Greek Debt Load: Smaller Countries Can Cause Contagion



Interactive Graph can be found at: http://www.bbc.co.uk/news/business-15748696

Source: Bank for International Settlements, IMF, World Bank, UN Population Division

Italian Debt Load: Large Versus Growth Expectations





US Debt Load: Large but Manageable






Credit Concerns Accelerate in Eurozone

Source: Barclays Capital as of 3/31/12

10 YEAR BOND YIELDS OF SELECT EUROZONE COUNTRIES


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Banks Deposit Cash at ECB to Raise Liquidity

Source: Bloomberg as of 3/31/12

ECB RESERVES VS. EUR BASIS SWAP


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ECB Reserves Euro Basis Swaps

Outlook: Europe Remains in Focus



• Europe is in a mild recession: Further austerity and contagion fears could increase market stress

• Liquidity effect from LTROs: European banks borrowed €529 billion in 3-year loans

• Bank deposit trends: A widespread bank run in the troubled European countries would cause major challenges in financing outflows.

• Sovereign debt refinancing: Spain and Italy likely to maintain market access but higher rates pressure budget deficits

• EU summits: There will likely be several emergency summits set up at short notice over the next several months. It’s not clear what those might achieve.

• French and Greek elections: Represents an important political development in Europe

• Exogenous shocks: Oil price increase or China slowdown could weaken economic activity


The Impact from Regulatory Reform

Old Rule 2a-7 Current Rule 2a-7 Estimated Yield Impact (bp)1

Implementation Date

Daily Liquidity – Taxable None 10% 0 May 28, 2010

Daily Liquidity – Municipal None None None None

Weekly Liquidity – Taxable None 30% (9 – 12) May 28, 2010

Weekly Liquidity –Municipal None 30% 0 May 28, 2010

Weighted Average Maturity (WAM) 90-days 60-days (0 – 8) June 30, 2010

Weighted Average Life (WAL) None 120-days (1 – 3) June 30, 2010

Illiquid Securities 10% 5% (1 – 3) May 28, 2010

Second Tier Securities5%

1% per issuer397-day limit

3% 0.5% per issuer

45-day limit(0 – 3) May 28, 2010

Total (11 – 29)


1Estimated yield impacts represent annual reductions in annual fund yield in a normalized rate environment over time. Reductions show impact to fund that is running at or near current Rule 2a-7 limits. Yield impacts differ among rated, institutional, and retail funds. Sources: FMR and Securities and Exchange Commission


Regulatory Changes Impacting Portfolio Management

MMF reform options under consideration

• Floating NAV

• Capital Contribution Options– Government Insurance / Guarantee– Mandatory Adviser Capital– Shareholder Capital– Investor Capital

• Redemption Restriction Options – Holdback on All Transactions– Triggered Redemption Fee– Minimum Account Balance

• Hybrid Industry Option– NAV Buffer + Trigger-based Redemption Fee


For institutional client use only15


Survival Guide: Robust Investment Process

Identify and Measure Relevant Risk Parameters

17 For institutional client use only

Investment Risks Significance of Risk Exposure Benefits of a Multi-Dimensional Research Process

Credit Risk Principal depreciation through price volatility or default

Non-reliance on Nationally Recognized Statistical Rating Organizations

Interest Rate Risk Principal depreciation through rising interest rates and widening spreads Quantitative Risk Management Framework

Liquidity Risk Lost access to cash holdings Thorough analysis of underlying liquidity provisions

Structural Risk Complex documentation contains embedded risks Dedicated legal team with specialized securities knowledge


For Institutional Use Only

Bottom Up Foundation• Fundamental Analysis

– Fundamental foundation– Relative value assessment

• Quantitative Analysis– Proprietary risk modeling– Security and portfolio level

• Structured Analysis– Capital structure analysis– Complements fundamentals

• Value-Added Trading– Relative value assessment– Across curve and structure– Macro trends/technicals

Top Down Perspectives• Macroeconomic Inputs

– Federal Reserve expectations– Sovereign landscape– Tail risk/scenario modeling

• Sector– Basis call: transparency– Fundamental and relative value

• Yield Curve– Breakeven analysis– Slope and volatility– Relative value opportunities

• Interest Rate– Duration views– Volatility perspectives

201101-8963For institutional client use only© 2012 FMR LLC. All rights reserved

18

ConsistentRisk-Adjusted

Alpha

Objective:Consistent

Risk-AdjustedAlpha

Bottom-up, fundamental Investment platform complemented by top-down inputs, results in a robust and durable process.

Multi-Dimensional Investment Approach

Liquidity Management Priorities Change over time



Sample Continuum of Hypothetical SMA Solutions

20 For Institutional Client Use Only

• All returns represent hypothetical annualized yields gross of as of April 13, 2012 and do not reflect the deduction of any fees and expenses which would reduce returns.

• The above referenced chart does not represent any current Fidelity or Pyramisstrategy.

For illustrative purposes only.Securities represent money market instruments and securities with durations of less than 3 years. Hypothetical portfolio data has inherent limitations and may not reflect the effect that any material market or economic factors may have had on Pyramis' use of the models. Hypothetical performance of a model is no guarantee of future results.

Hypothetical Gross Yield: 0.57% 0.77% 0.96% 1.12% 1.35%

Instrument Type

Commercial Paper / CDs - 1M Fixed 0.25% 30% 20% 10% 5% 0%Commercial Paper / CDs - 3M Fixed 0.52% 30% 20% 10% 5% 5%Commercial Paper / CDs - 6M Fixed 0.77% 20% 20% 15% 5% 5%Industrial Notes - 1Y Fixed 0.70% 5% 10% 10% 10% 5%Industrial Notes - 2Y Fixed 1.25% 0% 0% 5% 10% 10%Financial Notes - 1Y Fixed 1.38% 5% 10% 5% 10% 10%Financial Notes - 2Y Fixed 2.05% 0% 0% 5% 10% 20%Financial Notes - 1Y Floating 0.80% 10% 10% 15% 20% 15%Financial Notes - 2Y Floating 1.14% 0% 5% 20% 20% 20%Financial Notes - 3Y Floating 2.26% 0% 5% 5% 5% 10%

Total Allocation 100% 100% 100% 100% 100%Hypothetical Gross Yield 0.57% 0.77% 0.96% 1.12% 1.35%

OAD 59 76 102 138 164Spread Duration 73 131 211 254 299

Gross Yield as of 4/13/12 Target Asset Allocation

98.0%98.2%98.4%98.6%98.8%99.0%99.2%99.4%99.6%99.8%100.0%

0 4 8 12 16 20 24 28 32 36 40 44 48 52

98.0%98.2%98.4%98.6%98.8%99.0%99.2%99.4%99.6%99.8%100.0%

0 4 8 12 16 20 24 28 32 36 40 44 48 52

2121

Risk Management: Rate and Spread Scenario ImpactFED TIGHTENS 25 BP INCREMENTS;

SPREADS WIDEN 50 BPSFED TIGHTENS 50 BP INCREMENTS;

SPREADS WIDEN 100 BPS

Portfolio 1 Portfolio 2 Portfolio 3 Portfolio 4 Portfolio 5

Hypothetical portfolio data has inherent limitations and may not reflect the effect that any material market or economic factors may have had on Pyramis’ use of the models. The performance shown does not relate to any Fidelity or Pyramis strategy. Hypothetical performance of a model is no guarantee of future results. For Illustrative purposes only.

Boo

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Week NumberWeek Number

For Institutional Client Use Only

0.0%0.5%1.0%1.5%2.0%2.5%3.0%3.5%4.0%4.5%5.0%

0 4 8 12 16 20 24 28 32 36 40 44 48 520.0%0.5%1.0%1.5%2.0%2.5%3.0%3.5%4.0%4.5%5.0%

0 4 8 12 16 20 24 28 32 36 40 44 48 52

Income Potential Outweighs Volatility to Principal

22

Hypothetical portfolio data has inherent limitations and may not reflect the effect that any material market or economic factors may have had on Pyramis’ use of the models. The performance shown does not relate to any Fidelity or Pyramis strategy. Hypothetical performance of a model is no guarantee of future results. For Illustrative purposes only.For Institutional Client Use Only

Hypothetical Impact of Instantaneous Shocks

23 For Institutional Client Use Only

Hypothetical portfolio data has inherent limitations and may not reflect the effect that any material market or economic factors may have had on Pyramis' use of the models. The performance shown does not relate to any Fidelity or Pyramis strategy.Hypothetical performance of a model is no guarantee of future resultsFor Illustrative purposes only

0.2%

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Portfolio 1

Largest Interest Rate Shock: Dec 1980: Rates Rise 228 bps in one weekInterest Rate Shock: 1994: Rates Rise 128 bps over 3 monthsLargest Spread Widening Sep 2008: Spreads Widen 192 bps in one week

0.3%

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0.7%

Portfolio 2

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Portfolio 4

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Portfolio 5

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Portfolio 3

Summarizing the Survival Guide

• A currently vetted investment policy is the foundation of robust liquidity management

• It is critical to understand both asset and liability dynamics for accurate cashflow forecasting

• Investment goals and objectives are independent of current market conditions– Capital Preservation– Liquidity– Returns

• Cash Management is a time consuming, resource intensive multi-dimensional process– Develop a Risk vs. Return profile– Segment cash into appropriate allocations (operating, strategic, reserves)– Understand all aspects of the investible universe– Perform timely portfolio review

• Establish relationships with asset managers– Align investment priorities of asset manager with your investment goals– Investment process must be time-tested– State of the art risk management and compliance engines are key– Investment strategy communicated through monthly commentary, white papers, statements

• Continuously monitor and update your guidelines



Important InformationNot NCUA or NCUSIF insured. May lose value. No credit union guarantee.

The views expressed in this statement reflect those of the portfolio manager only through the end of the period of the report as stated on the cover and do not necessarily represent the views of Fidelity or any other person in the Fidelity organization. Any such views are subject to change at any time based upon market or other conditions and Fidelity disclaims any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a Fidelity fund are based on numerous factors, may not be relied on as an indication of trading intent on behalf of any Fidelity fund.

Diversification does not ensure a profit or guarantee against a loss.

An investment in a money market fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although the fund seeks to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in the fund. Interest rate increases can cause the price of money market securities to decrease.

Before investing, have your client consider the funds’ investment objectives, risks, charges, and expenses. Contact Fidelity for a prospectus or, if available, a summary prospectus containing this information. Have your client read it carefully.

For Institutional Investor Use only.

Fidelity Investments & Pyramid Design is a registered service mark of FMR LLC.

Fidelity Investments Institutional Services Company, Inc., 100 Salem Street, Smithfield, RI 02917

613474.1.0Not FDIC Insured. May lost value. No bank guarantee.


© 2012 FMR LLC. All rights reserved25

Documents

The Cash Manager's Survival Guide...The European Financial Stability Facility (EFSF) becomes fully operational Dec 2010 European Council and IMF agree to provide €85 billion to Ireland