news, numbers, analysis
A Newsletter from Fidelity worldwide investment, Nordic Region, #1 2013
FAST Asia Fund: The latest addition in Fidelity’s active strategy offering investment clock: where are we now?
Opportunities in the Nordic region
s t e k r a m g Emergin
CHERRY PICKING • The ´free lunch´ is over • Country, sector and stock selection is vital • Focus on AFRICA
This newsletter is for investment professionals only and should not be relied upon by private investors
content #1 2013
The value of being active We have come off to a good start in 2013 and even if there is still concern around growth recovery and sovereign debt, investor sentiment has improved over the past couple of months. As a matter of fact, credit crisis and political uncertainty are macro factors that have driven markets over a substantial period of time. We are however seeing a gradual shift in focus away from macro reflected in a decline in correlations and market fragility, a trend we believe will persist and which presents an opportunity for fundamental, active investors. You may read more about this in the enclosed white paper that we recently published. In this edition of Perspective we will look into the importance of taking such an approach with Emerging Markets in focus. No one would argue against the long-term growth drivers of developing markets but many of our fund managers and research analysts keep reminding us that “the free lunch is over” and that taking a more selective approach to emerging market investing will be the key to generate consistent returns over the years to come. I would like to highlight the launch of a new component in our range of active extension funds - the FAST Asia fund – that has been requested by professionals for some time now. Finally, I would like to ask for your feedback on this newsletter. We will send out a survey via email shortly asking you to share your views on what we can improve and what information you would like to receive from us. •
Petter Edwinson Head of Marketing & Communications, Nordics & Poland
Update The latest news from Fidelity Worldwide Investment analysis Emerging markets: Why the free lunch is over funds in focus Andy Weir on the Fidelity Funds Global Strategic Bond Fund update POWER OF THREE: OPPORTUNITIES IN EMERGING MARKETS For the second year in a row, Fidelity together with BlackRock and Franklin Templeton organize the Power of Three event. It takes place on March 21 in Helsinki and 22 March in Stockholm. Fidelity will discuss where opportunities exist within global emerging markets and the speaker is Alex Homan, Investment Director and Head of Emerging Markets Equity Product. Please visit www.vipevent.se/power for the full agenda and to register for the event.
Asian Equity: Fidelity Extends its FAST Product Offering With flexible long and short extensions, the new FAST product offers a rage of investment opportunities on both the positive and the negative side. Based on the success of the Fidelity Active extension STrategy products (FAST), Fidelity has now added an Asian equity FAST product to its fund range. The fund uses flexible long and short extensions around a core Asian equity portfolio to achieve a net equity exposure of around 90-110% in normal market conditions. It uses equity derivatives to short unattract-
The Mechanics of FAST Asia Fund
Use options for: Return enhancement Risk control
Focus on weakest stocks exposed to: Competetive threats Financial distress
Dominant franchises best positioned to benefit from Asia´s structural growth opportunities
is a newsletter from Fidelity Worldwide Investment.
NEW OPPORTUNITY. The city of Shanghai – part of a naturally volatile investment universe.
ive stocks and to add additional long exposure to preferred securities. The availability of long and short ideas at any one time determines the exact net equity exposure of the portfolio. “The Asian region offers a plethora of investment opportunities on both the positive and the negative side. In addition, it is a naturally volatile investment universe, which offers many opportunities to capture additional yield for the fund’s shareholders”, says Catherine Yeung, Investment Director Asia. The team structure is
Production: Redaktörerna AB Editorial Council: Petter Edwinson (Fidelity), Petra Broman (Fidelity), Fredrik Arvidsson (Red.) Design: Mikael Mannberg (Red.)
already designed to identify the winners and losers, with specialist research and trading resources to help identify those losing stocks that are a short rather than just a sell. In addition, the team’s other mandates demonstrate an affinity for higher levels of active money in order to drive the opportunity to outperform higher. Finally, like the other FAST Funds, the team uses a target price-led approach to identify both winners and losers in an absolute context, which forms a solid base for successful usage of options and also using a stoploss policy to control risk. •
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Investment Clock Update:
Synchronised Global Recovery Trevor Greetham’s Investment Clock is a way of relating the economic cycle to asset and sector rotation.
The Investment Clock model that guides our asset allocation decisions is in the equity-friendly ‘Recovery’ phase. As long as infla-
Current Asset Allocation Positioning Underweight
Equities Property Commodities Bonds Cash
Moving towards equities.
tion pressures remain absent, central banks don’t even have to think about tightening policy. We expect rising commodity prices to push us into ‘Overheat’ phase at some point in 2013, but central banks are unlikely to tighten policy at the first sign of inflation. Investor sentiment is very positive leaving the markets vulnerable to negative shocks. However, with economic data improving and monetary policy set to remain loose, the risk/reward picture is skewed to the upside. Our multi-asset funds are overweight stocks, property and commodities and underweight bonds. •
LEAD INDICATORS Inflation • Spare capacity is ample, commodity prices have lagged stocks and economists are generally downgrading their CPI forecasts. • So far, our global inflation scorecard continues to point downwards.
The Investment Clock model is in disinflationary ‘Recovery’.
Growth • Our global growth scorecard turned positive in December for the first time since June 2012. • The Recovery phase of the global economic cycle sees growth pick up with monetary policy remaining loose .
Bertrand Puiffe assumed responsibility for the Fidelity Funds Nordic Fund in August 2011. He has now fully completed the task of transitioning the fund to his own unconstrained investment style and has a year of strong performance under his belt. From a macroeconomic perspective, why should investors be interested in the Nordics? “The Nordics are extremely attractive both in terms of credit rating and the strength of public finances. These countries target a government surplus as part of their constitution, allowing governments the flexibility to help struggling companies should the need arise. It is hardly surprising then, that long-term GDP growth in Norway, Finland and Sweden is anticipated to be above the Eurozone average. In terms of fiscal and monetary policy, the picture is similarly encouraging, with the ability to implement interest rates cuts an attractive feature for investors. Low corporate tax rates, too, provide a very real boost to companies.” What are the benefits of your approach? “My approach is an unconstrained one. I seek to invest in Nordic companies based on their own merits rather than their size in the benchmark index. The long-term investment approach that I adopt aims to capture market inefficiencies that have resulted from the short term focus of other investors in the market.”
And within the portfolio? “I hold around 40–50 stocks, with a bias to midand small-caps. I adhere to a Bertrand systematic stock rating process to Puiffe identify the best ideas. At the moment, mid-caps look particularly compelling in valuation terms. I have a disciplined approach to risk management focusing on absolute risk, both at a stock level and during the portfolio construction process.” Can you give some examples of your approach in action? “Autoliv, the developer, manufacturer and supplier of automotive safety systems, is one example. The company’s revenue growth is driven by emerging markets, particularly China. In terms of pricing power, the firm currently enjoys around forty percent of the market share in the seatbelt and airbag industries. Barriers to entry are relatively high for potential rivals, although new players are entering the active safety market. In addition to this, the company has a very strong management team.” “The Norwegian media conglomerate, Schibsted also looks attractive at the moment. The company is a strong player in newspapers and print magazines and is rapidly, and very successfully, expanding in online classifieds beyond the Nordic markets. Indeed, in terms of overall online visitor numbers they are only beaten by Google and Facebook in many markets.” •
Ease of doing business. Nordic countries lead the way
CUSTOMER FOCUS As part of Fidelity’s mission to always act in the best interest of its clients, the company will launch a customer feedback program to better and fully understand client perception of their interaction with Fidelity. The in principle question to address is: Would you recommend Fidelity? “The program provides a system-
THE NORDIC COUNTRIES: ONE GREAT OPPORTUNITY
atic approach to gather and communicate customer feedback and to measure satisfaction improvement going forward. It will help us understand what our customers want and how we can better fulfil their needs, says Petter Edwinson, Head of Marketing & Communications.” The program will be rolled out during the spring across Europe. •
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l y n y k d ce ain ina sia azi dia SA ar wa lan de an s Br an Sp Ch In m or in we rm u r n F R e F S Ge N D
Ease of doing business ranks economies from 1 to 185, with first place being the best. A high ranking (a low numerical rank) means that the regulatory environment is conducive to business operation. The index averages the country’s percentile rankings on 10 topics covered in the World Bank’s Doing Business. The ranking on each topic is the simple average of the percentile rankings on its component indicators. Source: The World Economic Forum. Annual report (2012) on Global Competitiveness. The chart represents only a selection of the countries in the survey.
No More Free Lunch
Selectivity crucial within emerging markets The drivers of emerging markets are changing. With a far greater differentiation between markets, sectors and stocks, an active investment approach will be vital. The last decade was remarkable. So remarkable, in fact, that is unlikely to be repeated. The synchronised growth in emerging economies and stock markets that we saw from 2003-2008 was unprecedented in its strength and breadth. In fact, by 2007, only three countries in the world suffered negative economic growth as a rising tide lifted all ships. Global stock markets were driven much more by macroeconomic factors than has historically been the case. There were two key drivers behind this rare ‘Goldilocks’ phase in economies and stock markets: The global economy, especially emerging markets, benefited from a flood of debt-fuelled liquidity, or
‘easy money’. Double-digit Chinese growth provided a strong tailwind for emerging markets, supporting incremental commodity demand, and painting a compelling narrative for investors. Without a continued supply of ‘easy money’, growth in emerging markets should ease back to historical averages. We should also expect more volatility in business cycles. Chinese growth is widely expected to slow to 7-8% annually as activity rebalances towards the consumer sector. This will have consequences for the virtuous cycle that supported commodity prices and exports. As growth rates diverge, inves-
Some parts of the world are slowing, some are accelerating Ghana Zambia
Average real GDP growth rate 2009–13
Nigeria USA Asia ex Japan
Average real GDP growth rate 2003–08
Latin America Europe BRICS China -4
The change in average economic growth rates from pre to post crisis. Source: Goldman Sachs, EIU, Estimates 2012-13.
tors must view emerging markets as individual stories, not one heterogeneous bloc. Changes at the margin are likely to influence the future shape of emerging market returns. Selectivity within emerging markets will be crucial, requiring a more active approach. Investors have a habit of extrapolating the recent past into the future. But, history shows that economies
gentina and Venezuela). Economic convergence is not a given; it is hard earned. It is therefore vital to differentiate between markets that will continue to emerge in a positive manner from those at risk of ‘submerging’ from previous highs, for example through eroded competitive positions or excessive populist policies. The composition of emerging markets has changed considerably
“The next decade is highly unlikely to offer a simple continuation of what worked in the last.” and markets do not move in straight lines. The next decade is highly unlikely to offer a simple continuation of what worked in the last. Rebalancing in the global economy will create new winners and losers; new nations will come to the fore and acronyms such as BRICs will become increasingly outdated. The implications of China’s economic rebalancing will create winners and losers across emerging markets. In addition, unanticipated political and technological developments are bound to have a bearing on global economic trends. At the start of the 1990s, forecasters would have taken little account of the impact of the internet or China. Throughout history, the baton of emerging-market leadership has been passed among a diverse set of nations. Some grew quickly and offered promise before falling out of the MSCI Emerging Markets Index due to political regimes that applied controls to capital flows (e.g. Ar-
over the last decade. The exceptional growth of certain large markets has resulted in a much greater degree of concentration in the MSCI EM Index than was present at the start of the decade. In 2000, investing in the index meant allocating across a broad spread of emerging countries with Brazil, Taiwan and Mexico accounting for just over 10% each. Investors who bought the index in 2000 benefited from the double whammy of increasing exposure to strongly performing winners like China and Brazil. Now, investing in the index means allocating very large portions to China (17.4%) and Brazil (16.3%) – two of the best-performing countries of the boom period (2003-2008), whose rates of growth have slowed most measurably since.1 For example, Brazil’s economic growth slowed from c.6% in 2007 to 2.7% in 2011. The growing index weights of the ‘top 4’ have had the effect of squeezing down
Others Russia China
Composition of emerging market indices 2000 2005 2010 2012
exposure to other emerging countries, such as Mexico, Malaysia, and South Africa. This index concentration presents a much more serious challenge to passive investors than it does to active investors, the latter of which can underweight and overweight exposure to countries and their stocks based on fundamental research that takes account of market and stock specific factors. Average rates of Chinese growth are expected to slow from the remarkable double-digit levels they hit in the mid-2000s back to around 7â€“8% as the Chinese economy rebalances from an investmentdriven manufacturing export model
to a consumption-based economy. These figures still make China a standout in growth terms, but the rebalancing of that growth will have broader implications. Chinaâ€™s slowdown is quite normal; it has become a middle income country with per capita GDP now above $5000 per capita, the same level at which past manufacturing economies like Japan, Taiwan, and South Korea all began to slow down from their peak growth rates. Other emerging markets will continue to do well, either because of a China rebalancing or in spite of it. India is relatively more sheltered from global trade and as a commod-
The exceptional growth of certain large markets has resulted in a greater degree of concentration in the MSCI EM Index than at the start of the decade.
ity importer may be a net beneficiary if commodity prices fall back. The economy has more scope to grow from a lower base than many of its emerging counterparts, as long as reforms materialise. In subSaharan Africa, many economies are benefiting from strong structural growth drivers in the shape of increased urbanisation and consumption, as well as increasing mobile phone penetration, which is having a positive impact on productivity. In Latin America, Mexico may come to the fore again; its wage competitiveness, infrastructure, and close ties to the US are all in its favour. Generally, industrial commodity producers are most vulnerable to
Source: MSCI, as at 30.09.2012.
a fall in Chinese demand. But, the lasting effects of Chinaâ€™s rebalancing on single economies are more difficult to predict. For instance, Brazil will suffer in terms of its iron ore exports. However, as a key exporter of foodstuffs such as sugar and soybeans, other parts of the Brazilian economy could benefit from increased Chinese consumption. This is why the analysis required to identify the winners and losers must drill down to the stock level. l 1. MSCI as at 30.09.12
Page 6: A closer look at Africa
Africa – a truly emerging frontier Africa is one of the most interesting continents for emerging markets investors. Here, NICK PRICE, portfolio manager Emerging Market Equities, discusses the new opportunities in the region. Why Africa – and why now? “As a longtime investor in Africa, I am happy to see that the region has greater credibility as a destination for foreign capital. Many of its attractions are becoming better understood as several African countries deliver rapid growth rates from a low base. Rapid industrialisation is described as a principle supportive factor. Favourable demographics are also mentioned as a tailwind, with large and growing populations providing an excellent underpinning for consumer growth.” “Many individuals are already aware of Africa’s existing array of natural commodities, yet by investing in new infrastructure, new resource opportunities are being continually unearthed. This helps to explain the explosion of investment pouring into the region from China – a country with a well-deserved reputation for taking considered long-term strategic views. The most exciting new finds for us as equity investors are the hydrocarbon discoveries off the coast of east Africa, which are perhaps dwarfed only by offshore discoveries of Brazil in recent years.” And there is still time for investors to invest? “Although it is true that sentiment towards Africa has improved, in my view, there remains a sizeable
mismatch in the general perception of the region and its reality. Indicative of this, a recent survey by Ernst and Young found that those companies already doing business in Africa ranked the region’s attractiveness as higher than all other regions except Asia and, even then, the difference was slight. In contrast, respondents with no presence and experience in Africa viewed the region as the least attractive in the world, owing to factors such as political instability and corruption. Such negative perceptions continue to hold sway even among those who understand the aforementioned positives, which from my perspective indicates the existence of potentially unrealised and underappreciated investment opportunities.” “By saying this, of course, my intention is not to unduly minimise the real risks. Indeed, while many of the potential negatives associated with Africa are probably accorded an inappropriately high weighting by some investors, there may also be some others risks that are perhaps not so well appreciated. Variable liquidity is a good example. In the financial crisis period, a number of African, as well as ‘frontier market’ type funds, experienced liquidity issues stemming in part from the inability to freely exchange domestic currencies for US dollars. Quite a few purely African-focused funds were therefore unable to meet significantly higher levels of redemption requests at the time.”
CHERRY PICKING. South Africa provides an ideal gateway to the subSaharan Africa growth story, says Nick Price.
Any market that you consider especially interesting? “Successful investing is not just about risk awareness, but also risk mitigation where possible. In Africa’s case, a useful way to do this is to invest via the lower risk medium of the South African stock market. Many South African-listed companies provide good exposure to the broader African region. The aforementioned liquidity risks in the more developed Johannesburg Stock Exchange are significantly less than those in the less developed African markets.” “South Africa also provides an ideal gateway to the sub-Saharan Africa growth story from a corporate governance perspective. In the World Bank’s latest ‘Doing Business Index’– an independent gauge of the ease of doing business across the globe, South Africa is rated higher than western developed nations such as Spain and Italy, as well as the BRICs. On the specific and more directly relevant issue of ‘protecting investors’, South Africa is ranked (joint) 10th (out of all 183 countries surveyed) on an equal footing
with the UK, while scoring more highly than Japan and France.” And if you look at specific companies and sectors? “In terms of some specific examples of South African listed companies that provide good exposure to Africa more broadly I would highlight Shoprite, Mr. Price and Tiger Brands, all of which first built their South African footholds and have subsequently moved on to seeking a broader African distribution footprints.” “Aside from the consumer sector, I would highlight telecom companies MTN and Vodacom as two South Africa based companies that have been have been quite successful in expanding their networks into other African countries, benefiting from the rapid uptake of mobile telephony. Crucially, all of these companies benefit from good corporate governance and experienced management teams with strong strategic visions for growing profits and creating shareholder value.“ l
Funds in focus 7
Flexibility in uncertain times The Fidelity Funds Global Strategic Bond Fund is neither tied to a backward looking and market weighted index, nor confined to a single fixed income asset type. Portfolio manager ANDY WEIR explains the fund´s unconstrained approach to fixed income investing. What tail risks do bond markets face? “Tail risks might seem like remotechance events compared to the consensus outcome the markets are expecting, but their probabilities are not negligible. In a risk averse environment, markets will often attempt to price in these scenarios. In fact recently, bond markets were pricing in a possible double dip recession in the US and the potential collapse of the Euro. Thanks to concerted policy action in these two major economic regions, both of these tail-risks have since faded modestly. With a deal been agreed in the US by policy makers and US growth is looking like having a modest positive recovery. This is coupled with China’s recent PMI bounce back and stabilised growth outlook, a positive return back to weak to moderate positive global growth looks to be potentially on track. That said, this scenario is not without risk. The potential of the US debt ceiling debate, kicked down the road by policy makers, a return and refocus of the markets on the fragile internal Eurozone economic / political rebalancing. Either of these could easily upset this finely balanced outlook. Flexibility to portfolio asset allocation is key to navigate such uncertain times.” And if you look at the year ahead? “In the year ahead the fixed income asset classes will be unlikely to repeat the stunning performances of the last few years. Yields fell pretty much universally as a result of concerted short rate cuts and Quantitative Easing. I feel government yields are still too low compared to any long term fair value measure. The FED has told us they are on hold for at least 2 years and look certain to continue their QE for some time to come.”
“The potential of rising yields poses a threat: I believe that nominal rates are too low at the moment. At the top end, the flight to quality is suppressing higher quality government bond yields. At the lower end, yields on corporate bonds are being underpinned by a search for yield given this low interest rate environment. Although a tail-risk, the pain of a rise in yields from these low levels is likely to be greater than the upside to be gained from a further fall in yields. In other words, the riskreturn payoff is asymmetric, so this is a risk worth taking seriously. I also have some room for manoeuvre; at the moment I am underweight duration on the portfolio government bond exposure, to soften the downside risk should yields rise.” “I think credit does best as corporate fundamentals are strong with relatively low levels of leverage and new issuance likely to fall. The dominant technical that has driven cash investors both along the maturity curve and down the credit curve in a search for yield probably continues.” What about rising inflation in the medium to long term? “As the QE continues the fear of inflation will persist and I feel inflation linked bonds will continue to see large inflows and outperform
Cumulative Performance 8 7 6 5 4 3 2 1 0%
Source: FIL as at Dec 31, 2012. Basis nav-nav in USD terms with gross income reinvested.
nominal governments in all but the most bearish growth outcomes. Typically, when thinking about inflation, they normally associate this with growth. Albeit, growth has been moderately improving to the upside recently, the dominant force right now that is driving inflation is the vast amount of money that has been printed by central banks in the developed world. The danger is that the velocity of money could pick-up as a result of rising input prices and rising asset prices. This already appears to be happening to some extent, and I think the risk premium on inflation being pricedin by markets is too low. Therefore, I have maintained a bias of holding inflation-linked bonds to protect the portfolio against increasing inflation as this is underpriced in the market.” Anything else? “Printing money has also caused other distortions. It has created this illusion of liquidity. I don’t think investors are being paid enough to sacrifice liquidity. So they should keep a little bit of liquidity to remain nimble and minimise their transaction costs when investing in the fixed income market. Of the key indicators that I look at when making tactical decisions on the tail risks that the fund faces. Obviously, liquidity is important during periods of uncertainty, so this is where I am overweight. I am also using this liquidity, however, to maintain exposure to high yield and investment grade bonds where yields are still relatively attractive in this low growth environment.” “Looking into the coming quarter, with the potential volatility of the prospect of the US debt ceiling debate and budget sequestration, although corporate credit is worth holding currently, I might start looking to lighten up on corporate spread risks if necessary. One area I haven’t mentioned so far is emerging market debt. The fundamentals that these economies enjoy remain fairly robust when compared to the developed markets. My exposure is primarily in local currency inflation linked bond issuance, where I think there is significant room for the asset class to move forward.” “Looking ahead, it is fair to say that the crystal ball is looking rather murky. I am inclined to be a little cautious, and maintain utmost flexibility to alter the asset allocation of the portfolio, given the potential for these quick swings.” l
Past performance is not a reliable indicator of future results. The value of investments [and the income from them] can go down as well as up and investors may not get back the amount invested. For funds that invest in overseas markets, changes in currency exchange rates may affect the value of an investment. This newsletter is for Investment Professionals only and should not be relied upon by private investors. This newsletter must not be reproduced or circulated without prior permission. This communication is not directed at, and must not be acted upon by persons inside the United Kingdom or the United States and is otherwise only directed at persons residing in jurisdictions where the relevant funds are authorised for distribution or where no such authorisation is required. Fidelity/Fidelity Worldwide Investment means FIL Limited, and its subsidiary companies. Unless otherwise stated, all views are those of the Fidelity organisation. Fidelity only offers information on its own products and services and does not provide investment advice based on individual circumstances. Fidelity, Fidelity Worldwide Investment, and the Fidelity Worldwide Investment logo and currency F symbol are trademarks of FIL Limited. No statements or representations made in this document are legally binding on Fidelity or the recipient. Any proposal is subject to contract terms being agreed. Fidelity Funds (FF) is an open-ended investment company established in Luxembourg with different classes of shares. We recommend that you obtain detailed information before taking any investment decision. Prior to making your investment, please ensure you have read the Key Investor Information Document (KIID) which is available along with the full prospectus, the current annual and semi-annual reports free of charge from our distributors, from our European Service Centre in Luxembourg and from your financial advisor or from the branch of your bank. Holdings can vary from those in the index quoted. For this reason the comparison index is used for reference only. Foreign exchange transactions may be effected on an arms length basis by or through Fidelity companies from which a benefit may be derived by such companies. Due to the greater possibility of default an investment in corporate bonds is generally less secure than an investment in Government bonds. Default risk is based on the issuer’s ability to make interest payments and to repay the loan at maturity. Default risk may therefore vary between different government issuers as well as between different corporate issuers. Issued by FIL Investments International (registered in England and Wales), authorised and regulated in the UK by the Financial Services Authority. SSL1302N10/0813
Fidelity 8 Vinjett worldwide investment Box 3488 103 69 STOCKHOLM
The volatility of financial markets in recent years seems like it’s set to last and it has extended to include securities which in the past were considered as “safe havens“, such as Government bonds. Fidelity Funds - Global Strategic Bond Fund offers investors a wide diversification by investing globally in Sovereign and Government bonds, Inflation-Linked bonds, Investment Grade Corporate bonds, Emerging Market Debt and High Yield bonds. In addition, the risk is kept under control by quickly adapting the portfolio mix to the various market conditions. Thanks to its special formula, the fund could represent a good solution in order to balance your investment portfolio. Find out more about Fidelity Funds – Global Dividend Fund at fidelityworldwideinvestment.com
Stability in an uncertain environment.
Fidelity Funds – Global Strategic Bond Fund A new fund for a new time. Past performance is not a reliable indicator of future results. The value of investments (and the income from them) can go down as well as up and investors may not get back the amount invested. Changes in currency exchange rates may affect the value of an investment.
We recommend that you obtain detailed information before taking any investment decision. Prior to making your investment, please ensure you have read the Key Investor Information Document (KIID) which is available along with the full prospectus, current annual and semi-annual reports free of charge from our distributors, from our European Service Centre in Luxembourg and from your financial advisor or from the branch of your bank. Past performance is not a reliable indicator of future results. The value of investments [and the income from them] can go down as well as up and investors may not get back the amount invested. For funds that invest in overseas markets, changes in currency exchange rates may affect the value of an investment. Foreign exchange transactions may be effected on an arms length basis by or through Fidelity companies from which a benefit may be derived by such companies. Fidelity Funds (FF) is an open-ended investment company established in Luxembourg with different classes of shares. Sub-investment grade bonds are considered riskier bonds. They have an increased risk of default which could affect both income and the capital value of the Fund investing in them. Fidelity/Fidelity Worldwide Investment means FIL Limited, and its subsidiary companies. Unless otherwise stated, all views are those of the Fidelity organisation. Fidelity only offers information on its own products and services and does not provide investment advice based on individual circumstances. Fidelity, Fidelity Worldwide Investment, and the Fidelity Worldwide Investment logo and currency F symbol are trademarks of FIL Limited. No statements or representations made in this document are legally binding on Fidelity or the recipient. Any proposal is subject to contract terms being agreed. Issued by FIL (Luxembourg) S.A.(registered in Luxembourg), regulated in Luxembourg by the CSSF (Commission de Surveillance du Secteur Financier). SSL1302N04/0214