Important Information About Changes To Your Advisory Service March 29, 2018 Effective July 16, 2018, Fidelity will bring together multiple services. A new registered investment adviser called Fidelity Personal and Workplace Advisors LLC will unify services such as discretionary investment management, financial planning, and support from Fidelity representatives under a new advisory offering: Fidelity Wealth Services. This change affects your existing Fidelity managed account(s), including any Fidelity Portfolio Advisory Service accounts, Fidelity Personalized Portfolios accounts, Fidelity Personalized Portfolios for Trusts accounts, BlackRock Diversified Income Portfolio accounts, and/or Fidelity Private Client Group Advisory SM accounts. The advisory services you currently receive for these accounts will continue to be provided under the new Fidelity Wealth Services program sponsored by Fidelity Personal and Workplace Advisors LLC. Portfolio Advisory Services will be used as the name for all accounts managed through Fidelity Wealth Services. Strategic Advisers LLC will continue as the investment manager for all client accounts. The Program Fundamentals valid until July 16, 2018, are enclosed for your review. We have also enclosed the Program Fundamentals effective as of July 16, 2018, for both Fidelity Personal and Workplace Advisors LLC and Strategic Advisers LLC, along with your amended Client Agreement. These materials provide detailed information about Fidelity Wealth Services and your Portfolio Advisory Services account(s). We will be introducing a new, simplified pricing schedule. If the new pricing schedule results in an increase to the gross advisory fee on your existing accounts, a discount will be applied to avoid an increase. Information about how we will calculate the discount for existing accounts can be found under Predecessor Services in the Fidelity Personal and Workplace Advisors LLC Program Fundamentals for Fidelity Wealth Services. The new pricing schedule will be applied to any new accounts you open with Fidelity Wealth Services. 838014.1.0
Program Fundamentals: BlackRock Diversified Income Portfolio Strategic Advisers LLC 245 Summer Street, V5D Boston, MA 02210 1-800-544-3455 March 29, 2018 On behalf of Fidelity, we thank you for the opportunity to professionally manage your portfolio. This brochure was developed for our clients as well as those who are considering a managed account with Fidelity. It provides information about the qualifications and business practices of Strategic Advisers LLC ( Strategic Advisers ), as well as information about one of Fidelity s Portfolio Advisory Services offerings, BlackRock Diversified Income Portfolio. This brochure should be read carefully by all clients and those considering becoming a client. Throughout this brochure and related materials, Strategic Advisers may refer to itself as a registered investment adviser or being registered. These statements do not imply a certain level of skill or training. If you have any questions about the contents of this brochure, please contact us at 1-800-544-3455. The information in this brochure has not been approved or verified by the U.S. Securities and Exchange Commission ( SEC ) or by any state securities authority. Additional information about Strategic Advisers is available on the SEC s website at www.adviserinfo.sec.gov.
SUMMARY OF MATERIAL CHANGES The SEC requires investment advisers to provide and deliver an annual summary of material changes to their advisory services program brochure (also referred to as the Form ADV Part 2A). The section below highlights only material revisions that have been made to the BlackRock Diversified Income Portfolio Program Fundamentals from March 24, 2017, through March 29, 2018. Please contact a Fidelity representative regarding questions associated with your account at 1-800-544-3455. For Fidelity Private Wealth Management clients, please contact your Wealth Management Adviser. IMPORTANT INFORMATION ABOUT STRATEGIC ADVISERS Strategic Advisers, Inc. has transitioned from a corporation to a limited liability company. All references to Strategic Advisers, Inc. are deemed to refer to Strategic Advisers LLC. Client Agreements entered into with Strategic Advisers, Inc. shall continue in full force and effect as if entered into with Strategic Advisers LLC. IMPORTANT INFORMATION ABOUT CHANGES TO YOUR ADVISORY SERVICE Effective July 16, 2018, Strategic Advisers LLC ( Strategic Advisers ) will assign all existing BlackRock Diversified Income Portfolio (the Service ) Client Agreements to its affiliate, Fidelity Personal and Workplace Advisors LLC ( FPWA ). FPWA will succeed Strategic Advisers as the sponsor of the Service and, simultaneously, the Service will be transitioned into a new advisory program, Fidelity Wealth Services. The Client Agreement will be amended accordingly. Strategic Advisers will continue to provide discretionary portfolio management services for accounts as subadvisor to FPWA, and BlackRock Investment Management, LLC will continue to provide a model portfolio to Strategic Advisers. Please review the Fidelity Wealth Services Program Fundamentals and Client Agreement that accompany this Service brochure and speak to a Fidelity representative for more information. For clients who enroll in the Service on or after the date of this Service Program Fundamentals: by enrolling in the Service, you consent to the assignment and amendment of your Client Agreement as described above. 2
TABLE OF CONTENTS SUMMARY OF MATERIAL CHANGES 2 SERVICES, FEES, AND COMPENSATION 4 ACCOUNT REQUIREMENTS AND TYPES OF CLIENTS 9 PORTFOLIO MANAGER SELECTION AND EVALUATION 12 CLIENT INFORMATION PROVIDED TO PORTFOLIO MANAGERS 22 CLIENT CONTACT WITH PORTFOLIO MANAGERS 22 ADDITIONAL INFORMATION 22 3
SERVICES, FEES, AND COMPENSATION ADVISORY SERVICES Strategic Advisers LLC ( Strategic Advisers, or sometimes referred to as we or us throughout this document), is a registered investment adviser and an indirect, wholly owned subsidiary of FMR LLC (collectively with Strategic Advisers and its affiliates, Fidelity Investments or Fidelity ). Strategic Advisers was incorporated in 1977 and acts as sponsor and investment manager to all Fidelity managed accounts offered by Fidelity s Portfolio Advisory Services. Fidelity s Portfolio Advisory Services includes discretionary investment management services for individuals, joint account holders, certain retirement plans, Individual Retirement Accounts ( IRAs ), certain trusts or estates, business entities, and charitable organizations. Fidelity s Portfolio Advisory Services offerings include the BlackRock Diversified Income Portfolio (sometimes referred to herein as the Service ). The Service may be used in conjunction with a client s enrollment in Fidelity Wealth Management Advisory SM. The Service offers you discretionary investment management for accounts of $200,000 or more. The Service will invest your BlackRock Diversified Income Portfolio account ( Account ) in a blend of investments, which may include exchange-traded products and mutual funds. Exchange-traded products ( ETPs ) can include exchange-traded funds ( ETFs ), exchange-traded notes ( ETNs ), unit investment trusts, closed-end funds, master limited partnerships, and certain grantor trusts. ETPs and mutual funds are collectively referred to as Portfolio Investments throughout this document. Strategic Advisers is the investment adviser for the Service, responsible for discretionary management of accounts enrolled in the Service. Strategic Advisers has retained BlackRock Investment Management, LLC ( BlackRock ) to provide an investment model to be used by Strategic Advisers in rendering investment advisory services to accounts enrolled in the Service. BlackRock will provide Strategic Advisers with a model portfolio, and will provide periodic updates to the model portfolio. BlackRock may be referred to as the portfolio strategist in other collateral. Strategic Advisers provides oversight of the model portfolio and has discretionary management authority for, and is responsible for trading within, your Account. Strategic Advisers may select investments for your Account that differ from BlackRock s model portfolio, but may also implement BlackRock s model portfolio without change. The model portfolio provided by BlackRock to Strategic Advisers will not be based on the circumstances of, or otherwise tailored to, any individual client, and should not be considered as investment advice to any client of the Service. Investment advisory services provided to a client of the Service are furnished to the client solely by Strategic Advisers. BlackRock may provide a similar model portfolio to, or manage accounts using a similar investment strategy for, its other clients and may provide the model to such accounts or clients prior to providing to Strategic Advisers. Prior to your enrolling in the Service, Strategic Advisers will determine whether the Service is appropriate for you based on a review of your investor profile and any other relevant information that you provide to Strategic Advisers. Certain Fidelity Brokerage Services LLC ( FBS ) employees, including the Wealth Management Advisers supporting Fidelity Private Wealth Management, serve as investment adviser representatives of Strategic Advisers ( Fidelity representatives ). To facilitate the collection of such information, your Fidelity representative will ask that you complete an Investor Profile Questionnaire ( IPQ ), and we will prepare an investment proposal based on the information you provide (your Investment Proposal ). Please note that if you are enrolling in the Service as an underlying account associated with Fidelity Wealth Management Advisory SM, your Investment Proposal will be assessed based on the information you provide as part of Fidelity Wealth Management Advisory s overall wealth planning process. For purposes of this brochure, if you are a Fidelity Wealth Management Advisory SM 4
customer, references to your IPQ shall also refer to the Fidelity Wealth Management Advisory wealth planning process. Your acceptance into the Service is based on the completeness and accuracy of the information you provide to Strategic Advisers in your IPQ, the Service s Account Application, and other documentation. Therefore, it is important to respond completely and accurately when completing your IPQ and other documentation. If you decide to enroll in the Service, due to the Service s active, ongoing management, the actual securities purchased for your Account may differ from the Investment Proposal we prepared based on your information. Although Strategic Advisers may gather information regarding assets held outside of your Account as part of the IPQ, Strategic Advisers will not offer investment management services with respect to those assets. Once your completed and signed application for the Service has been received, a brokerage account will be opened on your behalf at FBS, Member NYSE, SIPC. Once the account funding process is complete, Strategic Advisers will begin to manage your Account on a discretionary basis. FEES AND COMPENSATION Advisory Fees General Information Your Account will be charged an annual advisory fee that is based on a percentage of the market value of the assets in the Account. The annual advisory fee covers Strategic Advisers ongoing management of your Account, including Strategic Advisers selection and oversight of BlackRock, any costs incurred by Strategic Advisers in connection with its acquisition of the model portfolio, trading costs associated with the purchases and sales of individual securities effected through Fidelity-affiliated broker-dealers, custody services provided by Strategic Advisers affiliates, the communications program associated with your Account, and the personal service you receive from your Fidelity representative. The annual advisory fee does not cover charges resulting from trades effected with or through broker-dealers other than Fidelity affiliates. You should be aware that costs associated with the use of broker-dealers other than Fidelity affiliates within the Service may be significant, and you should consider this when evaluating the total cost of participating in the Service. The annual advisory fee also does not include underlying expenses charged by the individual Portfolio Investments held in your Account, including the core Fidelity money market fund. These expenses, which vary by Portfolio Investment, are expenses all ETP and mutual fund owners pay. Details of these expenses can be found in each Portfolio Investment s respective prospectus. These expenses are not separately itemized or billed; rather, the published returns of the Portfolio Investments are shown net of their expenses. Some of these underlying expenses may be paid to Strategic Advisers or its affiliates and will be included in the Credit Amount described in the pages that follow. Strategic Advisers or its affiliates receipt of fees with respect to Portfolio Investments gives rise to a potential conflict of interest, as it provides an incentive to recommend such investments. Strategic Advisers seeks to address any such conflict through disclosures and the Credit Amount. For more information about other forms of compensation received by Fidelity representatives or Strategic Advisers affiliates, please see Client Referrals and Other Compensation below. Fees accrue daily based on the average daily balance in an account as determined at the close of business on the last business day of the previous calendar quarter. The advisory fee is calculated daily and applied in arrears, on a quarterly basis, and is due after the end of each calendar quarter. Please see the chart below for the annual advisory fee that may be charged to your Account. Please note that all fees are subject to change. 5
ANNUAL ADVISORY FEE SCHEDULE FOR BLACKROCK DIVERSIFIED INCOME PORTFOLIO Average Daily Assets* Annual Advisory Fee For the first $200,000 1.10% For the next $100,000 or portion thereof 0.90% For the next $200,000 or portion thereof 0.85% For the next $500,000 or portion thereof 0.80% For the next $1 million or portion thereof 0.70% For the next $1 million or portion thereof 0.60% For amounts greater than $3 million 0.55% * Average daily assets of Fidelity s Portfolio Advisory Services accounts are determined on the last business day of the quarter. Clients can request to aggregate their Account balance with certain other Fidelity s Portfolio Advisory Services account balances in order to arrive at the reduced fee rates applicable to different levels of account balances. In addition, certain individually owned accounts with the same tax reporting number will be automatically aggregated for fee calculation purposes. Fidelity Strategic Disciplines account balances cannot be aggregated for a reduced fee rate. To aggregate accounts for fee discounts, please contact your Fidelity representative for details of the account aggregation policy, including any other account that may meet the eligibility requirements, and to learn more about the different methods of aggregation. The annual advisory fee applied to your Account will be reduced by a Credit Amount equaling any underlying investment management and any other fees or compensation paid to us or our affiliates from Fidelity ETFs and mutual funds (or their respective affiliates) as a result of investments by your Account in these Portfolio Investments, including the core Fidelity money market fund, or for any distribution fees, shareholder servicing fees, and any other fees or compensation paid to us or our affiliates from non-fidelity Portfolio Investments or their affiliates as a result of investments by your Account in these Portfolio Investments. The compensation that affiliates of Strategic Advisers receive related to investments in Fidelity funds, such as the core Fidelity money market fund, may exceed the compensation received from investments in non-fidelity Portfolio Investments. The purpose of the Credit Amount is to reduce the annual advisory fee by the amount of compensation, if any, received by Strategic Advisers or its affiliates from Portfolio Investments or their affiliates as a result of investments by your Account. This Credit Amount is calculated daily and applied quarterly in arrears. Cash balances in your Account will be invested in the core Fidelity money market fund, the cash sweep vehicle for the Account. Any such cash or cash investments in the Account will result in a negative yield to the extent the quarterly advisory fee exceeds the rates of return for the core Fidelity money market fund. Please ask a Fidelity representative about the performance of the core Fidelity money market fund. Performance-Based Fees The Service does not charge performance-based advisory fees to you, and Strategic Advisers does not pay a performance-based fee to BlackRock for the provision of the model portfolio. BlackRock may, however, have customers independent of the Service who are charged performance-based advisory fees. The side-by-side provision of services by BlackRock for customers, some of which pay BlackRock performance fees and some of which do not, may lead to a conflict of interest in that BlackRock may have an incentive to favor those customers from which they receive performance-based fees over those customers from which they do not receive such fees. For more information regarding performance-based fees that may be received by BlackRock, please consult BlackRock s ADV, which is available on the Securities and Exchange Commission s ( SEC ) website at www.adviserinfo.sec.gov. Portfolio Investments Expenses Underlying expenses still apply to the Portfolio Investments held in your Account. These are the standard expenses that all ETP and mutual fund owners pay. Details of these underlying expenses can be found in each Portfolio Investment s respective prospectus. These expenses are not separately itemized or billed; rather, the published returns of ETPs and mutual funds are shown net of their expenses. 6
Sales Loads and Transaction Fees You generally will not pay any sales loads or transaction fees on the mutual funds purchased in your Account. A special sales load waiver may enable Strategic Advisers investment professionals to purchase mutual funds for your Account without incurring additional sales loads or transaction fees on mutual fund sales. Redemption Fees In order to protect the interests of long-term owners and/or recoup potential brokerage and other transaction costs, certain ETPs and mutual funds may impose redemption or other administrative fees if they are not held for a minimum time period. Strategic Advisers or its affiliates, at their sole discretion, may choose to pay any such redemption or other administrative fees on your behalf, but are under no obligation to do so. In addition, you are responsible for any short-term trading fees and other charges that result from the sale of existing investments (if any) to fund your initial investment in the Service (whether inside or outside the Account) and any subsequent withdrawals that you initiate. Miscellaneous Fees The annual advisory fee also does not cover charges resulting from trades effected with or through broker-dealers other than affiliates of Strategic Advisers, markups or markdowns by broker-dealers, transfer taxes, exchange fees, regulatory fees, odd-lot differentials, handling charges, electronic fund and wire transfer fees, or any other charges imposed by law or otherwise agreed to with regard to your Account. One such charge applies to sales of securities made for Accounts an industry-wide assessment mandated by the SEC totaling a few cents per $1,000 of securities sold. Please note that the amount of this regulatory fee may vary over time, and because variations may not be immediately known to Fidelity, the amount may be estimated and assessed in advance. To the extent that such estimated amount differs from the actual amount of the regulatory fee, Fidelity may retain the excess. These charges will be reflected on your monthly statements and/or trade confirmations. Billing You will be required to pay advisory fees in connection with an investment in the Service. The net advisory fee will be deducted from your Account or another Fidelity account that you have identified for this purpose, in arrears, on a quarterly basis. Certain assets in your Account may be liquidated to pay the fees, which could in turn lead to further liquidations to adjust the holdings in your Account so that it is invested in accordance with the model portfolio; these liquidations may generate a taxable gain or loss. Should either party terminate the investment advisory relationship, Strategic Advisers will prorate the fees due from the beginning of the quarter to the termination date, which is defined as the date when Strategic Advisers is no longer actively managing the assets in the Account. Information about Representative Compensation and Fidelity s Compensation Fidelity representatives who sell and support the Service receive compensation as a result of your participation, which may include compensation for both sales of new accounts and retention of assets in the Service. In many cases, this compensation is greater than what the representative would receive if you participated in other programs or paid separately for investment management, brokerage, and other services. Wealth Management Advisers supporting Fidelity Private Wealth Management clients receive a salary and a bonus; the bonus is based in part on the quality of the client experience provided, program and business development contributions, and functional leadership work, among other considerations. Wealth Management Advisers do not receive compensation related to any particular Fidelity products or services, including the Service. 7
In addition, some Fidelity representatives who sell and support the Service may participate in sales contests and may earn additional rewards based on sales criteria, including, but not limited to, the number of solicitations for advisory services they make, gross sales on Service accounts, or retention of assets in the Service and similar programs. Therefore, some Fidelity representatives who distribute and support the Service may have a financial incentive to sell or suggest continued participation in the Service over other programs or services. However, you are required to complete a questionnaire to assist in determining whether the Service is appropriate for you. For additional information about how Fidelity compensates its representatives in connection with the sale of this Service and other products, you should see the representative s compensation disclosure document that is included with your application materials, contact your representative, or visit Fidelity.com. The Fidelity representatives who sell and support the Service are representatives of both Strategic Advisers and FBS. Separate and apart from the Service, a Fidelity representative may provide you with investment education, research, and guidance offered by FBS. When acting in that capacity, the Fidelity representative is acting solely as a representative of FBS, and not as a representative of Strategic Advisers or the Service, and any fees related to the Service are not related to those additional services provided by the Fidelity representative. Strategic Advisers may offer other discretionary managed account products at a lower cost to different types of clients. Please contact your Fidelity representative for more information. ADDITIONAL INFORMATION ABOUT FEES Fee Changes All fees are subject to change. We will notify you in writing of any changes to the advisory fee schedule to be paid by you. You will have the ability to object to any changes to the fee schedule by writing to Fidelity s Portfolio Advisory Services within 30 days from the date of the notification. If we do not hear from you in writing, you will be deemed to have approved of such fee changes upon the end of the 30-day period. Fee Negotiations In rare circumstances, we may agree to negotiate the advisory fee for certain accounts. This may result in certain clients paying less than the standard fee. We may waive the advisory fee, in whole or in part, at our sole discretion, including those in connection with promotional efforts and other programs. In addition, we may waive, in whole or in part, the fee for certain current and former employees of Fidelity Investments. In certain circumstances, Strategic Advisers may manage certain accounts in a manner substantially similar to a Service account under arrangements that may include negotiated terms and conditions that depart from the standard Service offering. All rights and obligations are generally governed under an investment management agreement and may include investment guidelines. Nondiscretionary Options You may invest directly in the Portfolio Investments available through the Service in another account, without incurring an advisory fee charged by the Service. In this case, however, you would not receive the professional management services offered through the Service and may be subject to sales loads or transaction and redemption charges that are generally waived as part of the Service. Participation in the Service may cost more or less than if you were to purchase the services separately. Several factors, including trading activity and investment fees, influence the cost of the Service. Furthermore, certain Portfolio Investments available through the Service may not be available for purchase, nor may they be held outside of the Service. 8
ACCOUNT REQUIREMENTS AND TYPES OF CLIENTS The Service is generally available to individuals, joint account holders, certain retirement plans, IRAs, and/or certain trusts or estates. The minimum initial investment is generally $200,000 per account. In certain limited circumstances, Strategic Advisers may exempt accounts from the minimum initial investment requirement. Additional accounts opened by you or other members of your household must meet a $100,000 minimum per account registration. Note that certain of Fidelity s Portfolio Advisory Services account balances may be aggregated with certain other Fidelity s Portfolio Advisory Services account balances in order to arrive at a reduced fee rate. See the fee schedule for details or speak with a Fidelity representative. Minimums for initial investments may be lowered at the sole discretion of Strategic Advisers, including those in connection with promotional efforts. Accounts will be reviewed on a periodic basis to determine continued eligibility, and Strategic Advisers reserves the right to determine eligibility in its sole discretion. The Service is not available to foreign investors. In order to open an Account, you must be a U.S. person (including a U.S. resident alien), reside in the U.S., have a valid U.S. permanent mailing address, and have a valid U.S. taxpayer identification number. We reserve the right to terminate your participation in the Service (or limit your rights to access any or all account features, products, or services) if any authorized person on your Account resides outside the U.S. In addition, Strategic Advisers reserves the right to terminate your participation in the Service if the balance in your Account falls below a certain level. Further, Strategic Advisers reserves the right to terminate your participation in the Service if it believes the Service is no longer appropriate for you, or if your IPQ is incomplete and/or we have been unable to reach you for an extended period of time after multiple contact attempts. Strategic Advisers reserves the right to terminate, modify, or make exceptions to these policies. If your participation in the Service terminates, Strategic Advisers will redeem any and all Fidelity funds and, in general, other third-party funds held in your Account that are not eligible to be held outside an account managed by Strategic Advisers, and this redemption may generate a taxable gain or loss. Certain limitations apply to our ability to manage Accounts holding defined benefit plan assets. Generally, Strategic Advisers will manage investments only for a single-participant defined benefit plan (except in the case of an Account holding defined benefit plan assets where the plan benefits only the owner of the business sponsoring the plan and his or her spouse), and will treat the defined benefit plan as if it were a defined contribution plan. Strategic Advisers will not include or otherwise take into consideration plan-specific provisions, or any plan-related documents, in its investment management approach. OPENING AND FUNDING THE ACCOUNT Once your application and funding have been accepted, an account will be opened at FBS on your behalf and Strategic Advisers will invest the brokerage account in the Portfolio Investments that make up the model portfolio, generally within five business days of deposit. You may fund an Account with cash or by transferring interests in eligible ETPs or mutual funds to your Account. You can generally fund your Account with ETFs covered by Strategic Advisers research team and most mutual funds. For additional information about which ETPs and mutual funds may be eligible to be accepted in kind into your Account, please contact a Fidelity representative. Because Accounts are actively managed and change over time, actual investments and associated asset class allocations may vary from those listed in your Investment Proposal which you receive prior to enrolling. When funding your Account, your interests in any ETPs or mutual funds that are not part of the model portfolio, or that are part of the model portfolio but do not align with allocations therein, will be sold in whole or in part, and you acknowledge the transfer of any such interests into your Account acts as a direction to Strategic Advisers to redeem or sell any such ETPs or mutual funds. 9
You may be charged a redemption fee, as specified in the prospectus for each ETP or mutual fund, or any other fees as applicable to the redemption or sale of such funds or to the brokerage account from which interests in such ETPs or mutual funds are being liquidated or transferred. Under certain circumstances, the Service may voluntarily assume the costs of certain commissions. You may realize a taxable gain or loss when these interests are sold, and Strategic Advisers does not consider the potential tax consequences of these sales or current market conditions when following your deemed direction to sell such securities. In addition, when Strategic Advisers purchases Portfolio Investments on your behalf, you may receive taxable distributions out of earnings that have accrued with respect to a Portfolio Investment prior to your purchase (a situation referred to as buying a dividend). Please consult a tax adviser regarding these matters. Strategic Advisers reserves the right not to accept otherwise eligible securities, at its sole discretion, and/or transfer a noneligible security back to the customer based on certain circumstances. At times, Strategic Advisers may not accept certain ETPs or mutual funds that are used to fund your Account. These assets may have been eligible at the time of funding, but due to aggregate holding limitations as defined by Fidelity Investments internal guidelines (as a consolidation of companies) or by regulations (state or federal), they are no longer eligible. If you fund an account exclusively with cash, Strategic Advisers general policy is to invest that cash in your core Fidelity money market fund as soon as reasonably practicable, then further invest portions of these assets in the Portfolio Investments that make up the model portfolio, generally within five business days of full or substantial funding. If both cash and securities are used, the cash will be held in your core Fidelity money market fund until the eligible asset transfer is complete. ADDITIONAL DEPOSITS Additional deposits can be made at any time, but please note that Strategic Advisers general policy is to invest cash in your core Fidelity money market fund as soon as reasonably practicable, then may further invest portions of these assets in the Portfolio Investments that make up the model portfolio when certain criteria are met, which are determined by Strategic Advisers in its sole discretion, but generally within five business days of deposit. If there are specific handling instructions, please contact a Fidelity representative before making the deposit; otherwise, Strategic Advisers may fully invest the deposit as soon as the next business day following the date of deposit. WITHDRAWALS All trading and monetary transactions in your Account must be processed through a Fidelity representative, who can be reached via Fidelity s Portfolio Advisory Services toll-free number, or through written instructions by you (on the necessary forms if appropriate) and sent to a local Investor Center, a Fidelity mailing address, or through Fidelity s Portfolio Advisory Services client website (certain limitations may apply to web transactions and are detailed on the site). Requests for withdrawals must be received in good order before 12 p.m. Eastern time (ET), on a day that the New York Stock Exchange (NYSE) is open for business ( business day ), in order for the withdrawal request to be processed on the same business day. Such requests received after 12 p.m. ET may be processed on the next business day. If the NYSE closes before 4 p.m. ET, the cutoff time for withdrawal requests will generally be adjusted earlier in the day to allow sufficient time to process the transactions; however, it may take an additional day to process the withdrawal. ETP trades typically settle two business days after a trade is placed, but can take substantially longer, which could impact the amount of time it takes to complete a withdrawal request. For written requests received not in good order or if other trading activity is taking place within the Account on the day of a withdrawal request, it may take an additional day or days to process the withdrawal. 10
For withdrawals and account closures, you may request that: A check be sent to you Assets be transferred in-kind into another account Money be wired or transferred electronically via electronic funds transfer (EFT) to your bank or other account Depending on the type of Account and the exact dollar amount you wish to withdraw, more information may be necessary before the withdrawal can occur. For withdrawal requests that do not include instructions for a destination account, Strategic Advisers reserves the right to place a temporary do-not-trade instruction on the Account until instructions are provided. If such instructions are not provided within 30 days of the initial request date, Strategic Advisers may reinvest the pending cash back into the asset allocation strategy. Please note: A signature guaranteed letter of instruction is required if the withdrawn amount is going to an address that is not reflected on the account. The mutual funds held in your Account may have policies that restrict excessive trading. In order to comply, a fund may reject trade orders if the orders are deemed to represent excessive trading. As a result, in order to comply with a fund s trading policies, Strategic Advisers may be required to suspend investment management of your Account. Strategic Advisers will cease to manage your Account as soon as reasonably practicable. The imposition of any such order may take up to one business day to implement and may stop any trading activity that is occurring. As a feature on your Account, certain clients may elect to have all dividends, interest, and capital gains on eligible holdings set aside for automatic distribution by completing and submitting to FBS an Earnings Automatic Withdrawal Plan form. This feature is generally only available to nonretirement accounts. Please note that upon providing instructions for a nonretirement account to FBS, these amounts set aside awaiting distribution are no longer managed by or subject to the investment discretion of Strategic Advisers. It may take three to five business days for this Account feature change to take effect. ACCOUNT CLOSURE At any time, you may request to terminate your participation in the Service and close your Account. If you terminate the advisory agreement with Strategic Advisers, you must also instruct Strategic Advisers to either (i) liquidate your Account assets and send the proceeds to you or to a different account specified by you, or (ii) transfer your Account assets to another account. In order to meet the trading deadlines described below, all trading and monetary transactions associated with your Account closure must be processed by contacting a Fidelity representative. Under normal circumstances, Strategic Advisers will use its best efforts to process and execute requests for full account liquidations or full account closeouts via transfer in kind (collectively, full closeouts ) on the same business day for requests that are received in good order before 12 p.m. ET on a business day. Such requests received after 12 p.m. ET may be processed on the next business day. However, depending on the nature and timing of the request, certain full closeouts may take longer to fully process. If the NYSE closes before 4 p.m. ET, the cutoff time for full closeouts will generally be adjusted earlier in the day to allow sufficient time to process the transactions; however, it may take an additional day to complete an account closure request. ETP trades typically settle two business days after a trade is placed but can take substantially longer, which could impact the amount of time it takes to complete an account closure request. For written requests received not in good order or if other trading activity is taking place within the Account on the day of a full closeout request, it may take an additional day or days to close your Account. 11
When closing your Account, Strategic Advisers will assess any unpaid advisory fees from prior quarters and, as needed, will prorate and assess the advisory fees from the beginning of the final quarter the Account is open to the termination date, which is defined as the date when Strategic Advisers is no longer actively managing the assets in the Account. Additionally, note that once the Account is closed, additional deposits to the Account will be rejected and any Account features such as automated withdrawal plans will be terminated. There may be mutual funds held in your Account that otherwise may not be available for investment by you as a retail investor. In general, if you cease to be a client of the Service, Strategic Advisers will redeem any and all shares of such funds and you may incur a gain or loss as a result. If such shares are transferred to an account other than a Strategic Advisers managed account, you will be subject to the terms and conditions specified in that fund s prospectus. Strategic Advisers may terminate your participation in the Service for withdrawing cash from your Account that brings your Account balance below the minimum, for failure to maintain a valid mailing address, or for any other reason, in Strategic Advisers sole discretion. Before terminating you from the Service, Strategic Advisers will provide at least 30 days notice; provided, however, that in order to comply with applicable law, rule, or regulation, there may be situations when Strategic Advisers does not provide such notice. Depending on the reason for the termination, you may have the opportunity to resolve the issue but if you are unable to do so, the Service will cease and your Account will be restricted from trading pending your liquidation or transfer instructions. Liquidation of assets in taxable accounts may have adverse tax consequences. PORTFOLIO MANAGER SELECTION AND EVALUATION STRATEGIC ADVISERS INVESTMENT APPROACH Strategic Advisers is the investment adviser for the Service and is responsible for managing your Account on a discretionary basis. Strategic Advisers has selected BlackRock as the model provider for the Service, subject to Strategic Advisers oversight and monitoring. Strategic Advisers has implemented certain oversight processes and controls designed to achieve an appropriate level of supervision of BlackRock s activities as model provider to Strategic Advisers. Strategic Advisers is responsible for portfolio management, trading, and supervision of accounts and the Service. BlackRock is not acting as an investment adviser or portfolio manager with respect to your Account. GENERAL INVESTMENT STRATEGIES APPLICABLE TO THE OVERALL MANAGEMENT OF YOUR ACCOUNTS Strategic Advisers will manage your Account on a discretionary basis by investing in Portfolio Investments based on a model portfolio provided by BlackRock. In selecting Portfolio Investments for inclusion in the model portfolio provided to Strategic Advisers, BlackRock will give preference to Portfolio Investments advised by it (or one of its affiliates), including ishares ETFs, but may also include Portfolio Investments advised by third parties, including Strategic Advisers or its affiliates. The Portfolio Investments included in the model portfolio provided by BlackRock will vary in their exposure to different asset classes such as domestic stocks (U.S. equity securities); foreign stocks (non- U.S. equity securities); bonds (fixed-income securities of all types and maturities, including potentially lower-quality debt securities); short-term assets (short-duration investments); as well as different styles (investing for capital appreciation or income). Strategic Advisers has designed investment guidelines for the Portfolio Investments held in Service accounts. These guidelines may change from time to time at Strategic Advisers discretion based on consultation with BlackRock, market conditions or other considerations. For more information about the underlying Portfolio Investments held in your Account, you should review the applicable prospectuses. Strategic Advisers may select investments that differ from BlackRock s model portfolio, but may also implement BlackRock s model portfolio without change, subject to any reasonable investment restrictions you may impose. 12
The BlackRock Diversified Income Portfolio seeks an attractive level of investment income for an appropriate level of risk by investing the Account in Portfolio Investments that invest in (or track) the following major asset classes: domestic stocks, foreign stocks, investment grade and highyield bonds, and short-term investments. Under normal market conditions, Strategic Advisers will generally invest accounts in accordance with BlackRock s allocation, which seeks to position the model portfolio for risk-adjusted income by actively adjusting the asset class weightings in response to prevailing market conditions. The model portfolio will maintain a risk profile generally consistent with that of a balanced portfolio that holds 50% equity investments and 50% investment grade fixed-income (including short-term assets). However, in constructing the model portfolio, BlackRock has wide flexibility in the relative investment weightings given to each asset class and generally may allocate between 20% and 60% to equity investments and correspondingly between 40% and 80% to fixed-income investments. The model portfolio seeks to balance income and risk by limiting volatility over a rolling three-year period in line with a balanced portfolio (as measured by the annualized standard deviation of monthly returns). An Account in the Service is not intended to provide a complete investment program. You are responsible for appropriate diversification of assets outside your Account to help guard against the risk of loss. Cash flows from dividend distributions or interest payments will be paid to the core Fidelity money market fund and will be reinvested in the portfolio, unless you elect otherwise. Cash balances will be held in the core Fidelity money market fund until Strategic Advisers reinvests them in Portfolio Investments, which may not occur until your balance in the core Fidelity money market fund exceeds the amount defined by the model portfolio. ADDITIONAL INFORMATION ABOUT STRATEGIC ADVISERS INVESTMENT PRACTICES AND MODEL PROVIDER SELECTION PROCESS Prior to selecting BlackRock for the Service, Strategic Advisers performed a review of BlackRock and its investment style and approach. Strategic Advisers review included, among other things, assessing information about BlackRock and its investment strategies collected from third-party sources and information received directly from BlackRock. In selecting BlackRock, Strategic Advisers considered a variety of factors, including but not limited to, investment approach, portfolio characteristics, and BlackRock s total assets. Strategic Advisers evaluated information from both quantitative and qualitative analyses, including but not limited to: BlackRock s investment strategy and ability to adhere to the investment guidelines Credit research capabilities Security coverage and surveillance Experience of investment professionals Growth of assets under management Stability of management and ownership structure Governance program of the management company Operational capabilities Strategic Advisers will evaluate BlackRock s adherence to the investment guidelines no less than semi-annually based on the factors described above. Strategic Advisers, in its sole discretion, may replace BlackRock as the Service s model provider without notice to you if, for example, Strategic Advisers determines that BlackRock is not adhering to the Service s investment guidelines. In constructing the model portfolio, BlackRock will give preference to Portfolio Investments advised by it (or one of its affiliates), including ishares ETFs, but may also include Portfolio Investments advised, distributed and/or issued by third parties, including Strategic Advisers or its affiliates. In 13
general, the model will be allocated to Portfolio Investments that invest in (or that are linked to the performance of) the following primary asset classes: 1. Domestic stocks (U.S. equity securities) 2. Foreign stocks (non-u.s. equity securities) 3. Bonds (fixed-income securities of all types and maturities, including potentially lower-quality debt securities) 4. Short-term assets (short-duration investments) The Service may also invest in Portfolio Investments that invest in (or that are linked to the performance of) nontraditional asset classes and/or extended asset classes, including, but not limited to, real estate, commodities or other alternative investments. At times, investments in these asset classes may make up a substantial portion of your Account. As a result, your exposure to the primary asset classes may be reduced to gain exposure to these nontraditional and/or extended asset classes. The allocation of your Account may change over time. Portfolio Investments included in the model portfolio are selected by BlackRock based on a variety of objective and subjective factors, including, but not limited to, performance, expenses, quality, history of portfolio management, understanding of style consistency, asset size, availability, trading characteristics, current public information on the investment and its management, and overall fit within the model portfolio. In overseeing the model portfolio, Strategic Advisers may obtain information from various sources. Strategic Advisers may use both primary sources (e.g., talking directly with fund companies and fund managers) and secondary sources (e.g., analysts reports from fund companies that provide data on the investment strategies, risk profiles, and historical returns). Secondary sources also include a variety of publicly available market and economic information and third-party research, as well as proprietary research generated by Strategic Advisers. Strategic Advisers uses this information in designing the investment guidelines applicable to the model portfolio, and may analyze this information to assist in its oversight of the model portfolio. When investing in Fidelity and non-fidelity mutual funds, Strategic Advisers may from time to time consult the fund s investment manager to understand the manager s guidelines concerning general limitations, if any, on the aggregate percentage of fund shares that can be held under management by Strategic Advisers on behalf of all its clients. Funds are not required to accept investments and may limit how much Strategic Advisers can purchase. Additionally, Strategic Advisers may establish internal limits on how much it may invest in any one Portfolio Investment across the programs it manages. Strategic Advisers will work closely with fund management to minimize the impact of reallocation activity on acquired funds. In certain situations, liquidating positions in underlying Portfolio Investments may be accomplished over an extended period of time as a result of operational considerations, legal considerations, or input from underlying fund managers. In managing your Account, Strategic Advisers may decide to adjust positions in Portfolio Investments for a number of reasons, including: 1. The weighting of a particular security is too high or too low relative to the weighting in the model portfolio; 2. The deposit or withdrawal of cash or securities into your Account; 3. The composition of the model portfolio has changed. In general, Strategic Advisers does not attempt to conduct intra-day account evaluations, and Strategic Advisers does not generally attempt to time intra-day price fluctuations in its decisions to buy or sell securities. Strategic Advisers does not anticipate that each account will be traded each day. 14