FEBRUARY 2016

Fixed Income Monthly

Contents Strategy Summary

3

Macro and Rates Overview

5

Inflation Linked Bonds

6

Investment Grade Credit

7

High Yield

8

Emerging Markets

9

2

Fixed Income Monthly

Strategy Summary – February 2016 The FIXED INCOME MONTHLY provides a forward-looking summary of the medium-term views from the Fidelity Fixed Income team. Our investment approach is multi-strategy, with portfolio managers given clear accountability and fiduciary responsibility for all investment decisions in a portfolio. Given this portfolio manager discretion, there may at times be differences between strategies applied within a fund and the views shared below. We believe in managing portfolios with a mix of active investment strategies, including top-down and bottom-up, such that no single strategy dominates risk in a fund. Rates

––

–

=

Duration



UST Rates



++

+

++



EUR Rates - Core



EUR Rates - Periphery



GBP Rates

Inflation

+

––

–

=

IL – US



IL – EUR



IL – GBP



IL – JPY

 

EM IL

Credit

––

–

=

+



Credit Beta



USD IG



EUR IG



GBP IG



Asian IG (USD)

Hybrids

––

–

=

+

––

–

=

+

++



US HY



European HY



Asian HY

EM

++



Financial and Corporate Hybrids

High Yield

++

––

–

=

+

EM Hard Currency Sovereign



EM Local Currency Debt



EM Hard Currency Corporates



China RMB



++

3

10.7

6.7

6.7

6.0 3.3

3.4 1.3

0.1

0.5

1.6 0.1

6.5

High Yield

EMD Sovereigns (USD) EMD Corporates (USD) EM Local Currency Bonds EMD Inflation Linked (LC) China RMB (Dim Sum)

Hybrids

Global Hybrids

 Investment Grade Credit

USD IG Credit EUR IG Credit GBP IG Credit Asia IG Credit

-2%

USD I/L EUR I/L GBP I/L-0.9

 Inflation Linked

0.3

0%

USD Treasuries EUR Bunds GBP Gilts JPY JGBs

 Government Bonds

0.3

2%

USD EUR -0.3 GBP JPY -0.1

 Cash

0.5

1.9

4%

3.4

3.6

6%

6.7

5.4

8%

USD Loans

10%

6.3

9.2

12%

USD HY European HY Asian (USD) HY

Yields across bond asset classes

 Loans  Emerging Market Debt

Source: Fidelity International, Bloomberg, 31 January 2016. Redemption yields based off 10y German Bunds, 10y US Treasuries, 10y UK Gilts and 10y Japan JGBs, JPM (EMBI Global, CEMBI Composite, GBI EM GD), S&P/LSTA U.S. Leveraged Loan 100 B/BB Rating index and BofA Merrill Lynch bond indices (USD 3m Deposit Rate L315, EUR 3m Deposit Rate L3EC, GBP 3m Deposit Rate L3BP, JPY 3m Deposit Rate L3JY, US TIPS 5-15yr GWQI, Euro All Mats I/L EZJI, UK I/L 5-15yr GWLI, US Corp Master C0A0, Euro Corp ER00, Sterling Corp Collateral UC00, Asia Dollar Bond IG Corp ACIG, Global Hybrids Index G0EC, Contingent Capital COCO, US HY Master II H0A0, Global HY European Issuers Constrained HQ0C, ACCY 20% Lvl4 Cap 3% Constr Q490, Dim Sum Broad Market CNHJ), shows yield to worst for high yield. Hybrids universe defined as 50% G0EC and 50% COCO indices, Inflation linked bonds show real yields. Past performance is not a reliable indicator of future results .

| A cycle like no other: The outlook for Fixed Income

6

Summary of returns as at 31 January 2016 (%) Government

1M

3M

6M

YTD

1Y

3Y (Ann.)

USD (Treasuries)

2.2

1.6

2.2

2.2

0.2

2.2

EUR (Bunds)

2.5

1.6

2.4

2.5

0.6

4.2

GBP (Gilts)

3.8

3.7

4.1

3.8

-0.5

5.3

USD

1.8

0.7

-0.4

1.8

-2.9

-1.6

EUR

0.6

-0.6

-0.1

0.6

0.4

3.3

GBP

3.0

1.6

1.0

3.0

-0.6

1.6

USD

0.4

-0.7

-0.3

0.4

-2.9

2.1

EUR

0.6

0.5

0.4

0.6

-0.7

4.0

GBP

0.9

1.7

0.8

0.9

-3.3

5.4

Asian Dollar

1.2

0.9

1.6

1.2

1.9

3.5

-1.9

-1.8

-2.6

-1.9

-0.6

US

-1.6

-6.3

-7.9

-1.6

-6.8

0.6

European

-0.8

-2.0

-1.5

-0.8

2.6

5.2

Asia

-1.5

-3.6

-4.2

-1.5

-0.4

2.1

EM USD Sovereigns

-0.2

-1.8

-1.1

-0.2

0.7

0.3

EM USD Corporates

-0.2

-2.1

-2.8

-0.2

0.8

1.1

EM Local Currency (USD unhedged)

0.3

-4.0

-7.9

0.3

-14.9

-10.1

China RMB

-1.0

-0.7

-0.4

-1.0

2.8

2.9

Inflation Linked

Investment Grade Corporate

Hybrids Financial and Corporate Hybrids

High Yield

Emerging Markets

Source: Fidelity International, Datastream, 31 January 2016. Total Returns based off JPM (JCBBCOMP Index, JGENVUUG Index and JPEGCOMP Index ) and BofA Merrill Lynch bond indices (G0Q0, G0D0, G0L0, GWQI, EZJI, GWLI, C0A0, ER00, UC00, ACIG, G0EC, COCO, CNHJ, H0A0, HQ0C, Q490).

4

Fixed Income Monthly

Macro and Rates Overview ––

–

Monthly Review

Strategy

 Core government bonds rallied due to flight-to-quality demand.

Duration



UST



 The Fed’s statement was broadly unchanged. They continue to keep all options open for the March meeting.  German Bunds rallied following a dovish ECB meeting, with the market expecting further stimulus as soon as the next policy meeting in March.

Core Euro Rates

+

++

 

Periphery Rates UK Rates

=



 Gilts outperformed after the recent sell-off, as the BoE remains dovish.

Outlook It has been a busy start of the year for investors, as risky assets came under renewed pressure. Worries of a sharp slowdown in Chinese growth and of deflationary pressures spilling over from lower oil prices made markets nervous. Safe haven assets were in favour over higher beta ones, while inflation expectations continued on their downward trend. The BoJ’s surprise rate cut to -0.10% saw them join the club of central banks with negative rates. In our view, the decision was further evidence that the growth outlook remains fragile. It will add more pressure on other central banks to cut rates further, keeping policy easy and their currencies cheap against those of trading partners. In this context, the FOMC’s expectation of 100bp of rate hikes this year is at odds with market sentiment and economist expectations. Indeed the divergence between what rates markets believe is an appropriate path for Fed Funds and the Fed’s assumption keeps widening. Only one rate hike is now priced in over the next 12 months, which we see as a more realistic scenario. A combination of external headwinds for US manufacturing, and low inflation should keep US Treasury yields in check through 2016. As long as the Fed and market participants continue to disagree, the risk of a perceived policy error will keep investors wary and US rates curves on a flattening trend. The silver lining from lower oil is that consumers will enjoy real income gains, although this is likely to provide a lagged support to the US economy, dampening recession concerns over the medium term. Overall, we keep a neutral stance on US duration with the risk reward on US yields balanced at these levels. Even before the BoJ’s surprise rate cut, the ECB had reiterated its easing bias and the market now fully expects a rate cut of at least 10bp alongside a potential increase in the volume of monthly purchases to be announced at the March meeting. Updated staff forecasts will also be published, which will show another downward revision to their inflation outlook. The ECB is unlikely to manage HICP inflation back to “under, but close to 2%” target in the near future. The QE programme will be a defining feature of European bond markets in 2016 and will continue to provide a strong technical support limiting the upside for yields. However, Bund valuations are stretched and we prefer to express our constructive view via peripheral bonds rather than core bonds, as the former provide a larger spread cushion and exhibit a lower correlation to broader risk sentiment than in recent past. The Bank of England acknowledged again in January that UK economic growth is not without challenges. Despite UK unemployment now back at levels last seen in 2006, wage growth has slowed and retail sales have disappointed lately. With the government budget to be announced in March and the spectre of a Brexit referendum to take place by June at the earliest, the BoE will err on the side of caution and a rate hike is unlikely at the very least until Q4 2016. The market has repriced rate expectations accordingly, with the first 25bp rate hike fully priced by November this year. Gilts have benefitted from flight-to-quality demand, as well as from the technical support coming from the Bank of England’s reinvestment of proceeds from bonds maturing in its Asset Purchase Facility portfolio. At current levels, Gilt valuations look expensive and we therefore prefer to keep an underweight position, favouring Euro duration as well as GBP corporate credit where higher yields help smooth total returns.

10 year government bond yields 6%

10yr Yield

5%

A slow and shallow rise in the Funds rate is priced

Current

Feb-17

Feb-20

US

1.88%

2.10%

2.51%

GER

0.32%

0.45%

0.87%

UK

1.57%

1.76%

2.32%

4%

6% 5% 4%

Implied

3%

Fed Funds Rate Market Implied (current) 94-95 Cycle 99-00 Cycle 04-06 Cycle FOMC Median Forecast

3%

2%

2%

1%

1%

0%

0% 04

06

08 10 10yr Bund

12

14 16 10yr Gilt

18

20 22 24 10yr Treasury

Source: Fidelity International, Bloomberg, 31 January 2016

05 06 07 08 09 10 11 12 13 14 15 16 17 18 19

Source: Fidelity International, Bloomberg, 31 January 2016

5

Inflation Linked Bonds ––

–

Monthly Review

Strategy

 Inflation-linked bonds posted positive returns in January but a

IL – US



IL – EUR



mixed performance relative to nominal government bonds

 Inflation breakevens narrowed in the US and Eurozone. Soft monthly inflation readings, together with further declines in oil prices, dampened investors’ inflationary expectations over the month.

 UK breakevens were partially supported by a positive surprise

IL – GBP



IL – JPY



=

+

++



EM IL

from the December CPI release, 0.2% on an annualised basis, up from 0.1% in November, as well as the expected passthrough of currency weakness into higher prices and a dovish BoE.



Outlook Oil prices fell further in January, having now lost more than 70% of its value over the past 18 months. As a result, inflation markets tracked oil prices lower, reigniting central bank concerns over falling inflation expectations. The outlook for oil remains uncertain, and any forecast will be heavily dependent on assumptions for global demand as well as supply dynamics. Our view on oil is more optimistic than market consensus, and we see prices rebalancing in the second half of the year. Capex cuts will accelerate, curtailing supply, while demand should continue to grow at a steady pace, thanks to the boost that lower gasoline prices are giving to disposable income. There are clearly plenty of assumptions and caveats, with geopolitics playing a big role in our forecasts, but given the current state of play, we believe a rebalancing is now due. Inflation-linked bonds (ILBs) have struggled to perform relative to nominals of late, with a mix of hurdles weighing on returns. Lower equities, lower oil and central banks all competing to devalue currencies pushed investors to review their inflation outlook. Despite this, ETF flows were positive in the month, likely a reflection of compelling valuations keeping investors interested. Although the short term outlook remains challenging, we are constructive on certain areas of the inflation-linked bond market, particularly in Europe and in the US. US breakevens traded poorly in January, in sympathy with softer manufacturing data and falling oil prices. Moreover, worries that the Fed may be on track to make a policy mistake caused inflation expectations to deanchor as 5y5y inflation swaps moved lower by 20bp, to 1.50%. At current levels, US TIPS offer value to investors who are willing to weather near term volatility. Based on our oil price outlook, we see some stabilization in TIPS and in breakeven inflation rates in the second half of the year, but a dovish shift by the Federal Reserve is required for the asset class to meaningfully outperform nominals. European ILBs were not immune to the negative sentiment in January and underperformed nominals. The December ECB meeting saw Mario Draghi reiterate the Governing Council’s dovish stance. This provided support to European fixed income across the board. We expect this combination of easy communication and action for the rest of 2016. The balance of risks in breakevens favours an overweight position in European ILBs, with the market pricing in only about 50bp for German and Italian inflation on average over the next 5 years. UK ILBs followed nominals higher during the latest rush towards safe havens, although UK breakevens followed their international counterparts lower. With the potential for risk premium to increase as we approach the Brexit referendum date, and the very long duration of the UK inflation bond market, we choose to err on the side of caution. A large amount of supply is also expected to come to market, providing us with another reason to stay underweight.

10yr Breakevens price in very low inflation ahead

US Breakevens beta to WTI

0.5%

0.70

0.3%

0.60

0.0%

0.50

-0.3%

0.44

0.42

0.40

-0.5%

0.29

0.30

-0.8%

0.21 0.20

-1.0%

0.10

-1.3% -1.5%

0.00 11

12

13 US

14 UK

15

16

Germany

Source: Fidelity International Quantitative Research, 3 February 2016 Chart shows the deviation between the market implied breakeven rate and the Fidelity fair value assuming inflation is at the central bank’s target. Fair value accounts for the wedge between the inflation rate against which inflationlinked bonds are priced and each central bank’s target.

6

0.62

0.61

Fixed Income Monthly

30yr

10yr Long History

5yr

Last 12 Months

Source: Fidelity International, Bloomberg, beta is calculated using weekly changes of US breakevens and WTI. Long history refers to period from March 2000 to present for 10yr and 30yr, 2004 to present for 5yr, January 2016.

Investment Grade Credit Monthly Review

Strategy

 Investment grade corporate bonds posted positive returns over the month, but underperformed government bonds

Credit Beta

 Credit spreads widened across the US, UK, European and Asian dollar investment grade bond markets in January. Energy and commodity names lead the widening as oil and metals prices continued to push to new lows.

 At the regional level, spreads on US and Sterling investment

––

–

=

+

++

 

USD IG



EUR IG



GBP IG



Asian IG (USD)

grade corporate bonds widened the most. Meanwhile, European and Asian dollar corporate bonds witnessed only a marginal spread widening in January.

Outlook Credit investors were not immune to the volatility that affected risk and commodities. The negative risk sentiment spilled over from equities, pushing spreads wider across all investment grade (IG) credit markets. Nevertheless, duration helped to cushion total returns, with all IG indices up on the month. US IG credit is still faces the headwinds of high leverage, a challenging earnings outlook and a strong USD as the Fed’s monetary policy diverges from other global central banks. Over the month, US IG spreads widened by 29bp, with energy and industrials lagging the market. We acknowledge that valuations have improved considerably over the last 2 years, as spreads widened in reaction to the substantial amount of issuance from corporates and an uncertain macro picture. We see value in selectively adding to high quality names but retain an overall neutral stance on the asset class, owing to perceptions that the Fed is still being too hawkish with its expected rate hiking path. European investment grade credit remains our favourite area of IG credit, thanks to cheap valuations, strong technical support by the ECB and the ongoing recovery across all European economies. As the amount of negative-yielding government bonds in Europe increases, the asset class will continue to attract the demand of income-seeking investors. However, volatility is likely to stay elevated, both in government bonds and spreads, with several political hurdles in Europe over the next 12 months. We therefore prefer bonds with high coupon cash flows, which can offer more stable total returns. From a sector perspective, financials were on the back foot in January following negative headlines around capital adequacy, but the ECB went to great lengths to calm market concerns at its January meeting. We remain constructive on the sector, given the work done by institutions to bolster capital ratios that provides us with comfort in investing across all areas of the capital structure. Asia IG outperformed all other IG markets in January. The asset class is benefitting from local central banks easing monetary policy, while weakening of the RMB is pushing investors towards high quality USD-denominated credit. Valuations look rich though, as spreads have compressed meaningfully over the last 12 months and, at 190bp, are now tighter than those in US IG. Given this, we maintain a neutral stance, waiting for better levels to re-engage.

Spreads 210

Financials proved resilient through spread widening 700

OAS bps

190

600

170

500

150

400

130

300 200

110

100

90

0

70

50 Jan-15

OAS bps

-100 Apr-15

Jul-15

Oct-15

Jan-16

99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14

Average Financials Spread Premium US IG

EUR IG

GBP IG

ASIA IG

Source: Fidelity International, BofA Merrill Lynch, Bloomberg, 31 January 2016

Average IG Spread Source: Fidelity International, BofA Merrill Lynch bond indices, financials spread premium reflects the spread of the investment grade financials index for a given currency over its respective investment grade corporate index, applies simple average of USD, GBP and EUR indices, 31 January 2016

7

High Yield Monthly review

Strategy

 High yield corporate bonds sold off in January, underperforming both government bonds and investment grade corporate bonds across major regions.

US HY

 Widening of credit spreads started early in the month due to the depreciation of the renminbi and selloff in Chinese equities.

Asian HY

––

–

=

+

++

 

Euro HY



 The accelerated drop in oil prices soon added to investors’ woes. A partial recovery in oil, together with a dovish ECB and unexpected easing measures from the BoJ, helped credit recoup some of its losses towards month-end.

 Most sectors ended in the negative territory in January. Energy was the biggest detractor, with the BofAML US Energy index falling over 8% during the month, following a 12% fall in December. Other key detractors were mining, insurance and transportation. Conversely, retail, media and healthcare were some of the exceptions which recorded positive total returns.

Outlook High yield (HY) credit markets followed equities and registered their worst start of the year since 2008. Credit markets have been pricing in a less optimistic outlook for the economy and for corporate fundamentals for several months now, while equity markets have rushed to catch up in the space of just a few weeks. Default expectations have been increasing in line with the selloff in oil, particularly in US HY where energy names make a larger part of the investment universe, circa 16%. After having been cautious on US HY for most of 2015, due to high leverage and concerns around energy exposure, we have recently become more constructive on the asset class. Valuations have reached levels that warrant a more positive stance, particularly in the Energy sector, where the market is pricing in an 85% cumulative default rate over the next 5 years. While uncertainty remains and a large part of US HY performance will depend on oil, our view is less pessimistic than what the market expects, as we do not forecast a recession to hit the US economy. European HY performance suffered in light of the negative sentiment towards risky assets in January, with spreads widening by 35bp on the month. Despite the disappointing start to the year, mainly beta-driven, we believe the asset class will provide the best risk adjusted returns within the HY universe in 2016, thanks to lower energy exposure, attractive yields for income seeking European investors and technical support from the ECB. Moreover, unlike the US, European HY default rates are expected to fall, from the 3.6% level recorded at the end of 2015, to 2.9% by the end of 2016. There are risks that we continue to monitor, in particular around leverage trends. We are likely to see a pickup in M&A activity in Europe this year as the credit cycle matures. Nevertheless, we believe that the European credit cycle has a few more years to run, with companies lagging their US counterparts in terms of propensity to take on extra debt. Asia HY spreads widened as market worries about Chinese growth weighed on sentiment in January. However, 2015 showed the resilience of the asset class to deteriorating Chinese headlines, by closing the year ahead of all other HY regions on a total return basis. The absolute level of yield is attractive, and could suit investors looking for income, particularly as yields on global government bonds continue to trend lower. At current spread levels however, only 40bp wider than US HY, we do not see enough compensation for the lower liquidity that the asset class offers. On a relative basis we therefore choose to keep a neutral stance on Asia HY, preferring US HY instead.

Spreads

Current Default Rates vs. Forecast

OAS bps

5.0%

950

4.0%

850

750

HY Default Rate, % 4.4% 3.9% 3.4%

3.4%

3.2%

2.9%

3.0%

650

2.0% 550

1.0%

450 350 Jan-15

0.0% Apr-15 US HY

Jul-15 European HY

Oct-15

Jan-16

Asia HY

Source: Fidelity International, BofA Merrill Lynch. 31 January 2016

8

Fixed Income Monthly

Global End of December 2015

US

Europe

December 2016 Forecast

Source: Fidelity International, Moody’s Research. Data as of 31 December 2015

Emerging Markets ––

–

Monthly review

Strategy

 Emerging market bonds were under pressure in January.

Hard Currency Sovereign



 Hard currency emerging market investment grade outperformed high yielding names amidst a risk off environment

Local Currency Debt



Hard Currency Corporates



China RMB



 A deeper than forecasted growth downturn in China, inability on the part of Brazil’s politicians to implement fiscal reforms and low commodity prices continue to be looming risk for emerging markets

=

+

++

 Emerging market currencies continued on their weakening trend against a strong US dollar

Outlook Emerging market debt continued to trade in line with broader risk sentiment in January, with EM corporates marginally underperforming EM Hard Currency Sovereigns, as global credit markets came under renewed pressure. The key headwind for EM continues to be the anaemic global growth picture that still transpires from macro data from both EM and DM. We believe the broad investment universe will struggle to find a firm footing until we see signs of a pickup in global demand and trade flows. Domestic demand in EM has slowed in sympathy with exports, and combined with the lagged effect of the depreciation in EMFX, this is slowly feeding through, to support current accounts. PMIs are also gradually improving as are economic surprises. Although fundamentals remain challenging, both valuations and technicals are supportive for EM hard currency bonds. Spreads appear optically wide versus our GDP-weighted composite EM PMI measure, while the supply of hard currency bonds was lacklustre in 2015, and will not increase meaningfully in 2016. Overall, we remain cautiously optimistic on EM hard currency bonds, both sovereigns and corporates for 2016, with a preference for the latter where the spread pick up over government bonds compensate investors for the extra credit risk. In particular, we continue to like corporate credits that benefit from EMFX depreciation, exporting goods in USD and with a cost base in local currency. With more central banks on an easing path, the yield that the asset class provides of just under 7% is attractive for income-starved investors. We recently moved to a more positive stance towards EM Local Currency debt. With EMFX experiencing yet another year of sharp losses in 2015 and currency returns of -17% over the past 12 months, FX valuations have now reached extremely cheap levels. Local duration is also attractive as central banks must strike the right balance between containing inflation, particularly in LATAM, and supporting economic growth by cutting rates, as we continue to see in Asia. In the short term the asset class will experience further volatility, and be heavily influenced by US and Chinese monetary policy. On a longer term horizon, valuations are now attractive enough to warrant an overweight stance. Lastly, the market for RMB bonds continues to develop at a very rapid pace, with local companies issuing in RMB to refinance USDdenominated liabilities. With yields now at 6.65% on the broad Dim Sum Bond index, the carry and diversification that the asset class provides will continue to attract the interest of global investors, particularly given the reserve-currency status that the renminbi recently acquired. The market currently prices in a continued devaluation of the renminbi over the next 12 months, from 6.33 currently to 6.93. Although the currency is likely to continue losing ground on a TWI basis as the authorities continue to open up the capital account, they will also be reluctant to allow for a sharp devaluation in the near term.

EMBIG Spreads vs. EM PMI

Yields Across EM Asset Classes

550 500

47

7.5

49

7.0

450 51 400 350

53

300

55

6.5 6.0

5.5 250 200 Feb-11

57 Feb-12

Feb-13

EMBIG Spreads

Feb-14

Feb-15

Feb-16

EM PMI (rhs, inverted)

Source: Fidelity International, Bloomberg, Markit, 31 January 2016.

5.0 Jan-14

Jul-14 EM HC Debt

Jan-15 EM LC Debt

Jul-15

Jan-16

EM HC Corps

Source: Fidelity International, Bloomberg, JP Morgan EMD and Barclays Global HY bond indices, 31 January 2016

9

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Fidelity Funds are promoted in Malta by Growth Investments Ltd. in terms of the EU UCITS Directive and Legal Notices 207 and 309 of 2004. The Funds are regulated in Luxembourg by the Commission de Surveillance du Secteur Financier. Switzerland: Our legal representative in Switzerland is BNP Paribas Securities Services, Paris, succursale de Zurich, Selnaustrasse 16, 8002 Zurich. Our paying agent for Switzerland is BNP Paribas Securities Services, Paris, succursale de Zurich, Selnaustrasse 16, 8002 Zurich. Italy: Investments should be made on the basis of the current Key Investor Information Document (KIID) and prospectus, which are available along with the current annual and semi-annual reports free of charge from our distributors, from the Italian Local Paying Agent or from our Customer Services Centre in Luxembourg. This material is issued by FIL Investments International authorised and regulated by the FCA (Financial Conduct Authority). Spain: For the purposes of distribution in Spain, Fidelity Funds, Fidelity Funds II and Fidelity MultiManager SICAV are registered with the CNMV Register of Foreign Collective Investment Schemes under registration numbers 124, 317 and 432 respectively, where complete information is available from Fidelity Funds, Fidelity Funds II and Fidelity MultiManager SICAV’s authorised distributors. The purchase of or subscription for shares in Fidelity Funds, Fidelity Funds II and Fidelity MultiManager SICAV shall be made on the basis of the Key Investor Information Document (KIID) that investors shall receive in advance. The Key Investor Information Document (KIID) is available free of charge and for inspection at the offices of locally authorised distributors as well as at the CNMV. Nordic region: We recommend that you obtain detailed information before taking any investment decision. Investments should be made on the basis of the current prospectus and KIID (key investor information document), which is available along with the current annual and semi-annual reports free of charge from our distributors and our European Service Centre in Luxembourg, FIL (Luxembourg) S.A. 2a, rue Albert Borschette BP 2174 L-1021 Luxembourg. The Netherlands: In the Netherlands, documents are available from FIL (Luxembourg) S.A., Netherlands Branch (registered with the AFM), World Trade Centre, Tower H, 6th Floor, Zuidplein 52, 1077 XV Amsterdam (tel. 0031 20 79 77 100). Fidelity Funds is authorised to offer participation rights in the Netherlands pursuant to article 2:66 (3) in conjunction with article 2:71 and 2:72 Financial Supervision Act. Belgium: We recommend that you obtain detailed information before taking any investment decision. Investments should be made on the basis of the current Key Investor Information Document (KIID) and prospectus, which are available along with the current annual and semi-annual reports free of charge from our distributors, from FIL (Luxembourg) S.A. and the financial service provider in Belgium, CACEIS België NV, with head office at Havenlaan 86C, B320, 1000 - Brussels. Belgium: We recommend that you obtain detailed information before taking any investment decision. Investments should be made on the basis of the current Key Investor Information Document (KIID) and prospectus, which are available along with the current annual and semi-annual reports free of charge from our distributors, from FIL (Luxembourg) S.A. and the financial service provider in Belgium, CACEIS België NV, with head office at Havenlaan 86C, B320, 1000 - Brussels. Poland: This information is for Investment Professionals in the meaning of the Annex II to the Directive 2004/39/EC of the European Parliament and of the Council of 21 April 2004 on markets in financial instruments amending Council Directives 85/611/EEC and 93/6/EEC and Directive 2000/12/EC of the European Parliament and of the Council and repealing Council Directive 93/22/EEC only and should not be distributed to and relied upon by private investors. This material does not constitute a recommendation within the meaning of the Regulation of the Polish Minister of Finance Regarding Information Constituting Recommendations Concerning Financial Instruments or Issuers Thereof dated October 19, 2005. No statements or representations made in this document are legally binding on Fidelity or the recipient and not constitute an offer within the meaning of the Polish Civil Code Act of 23 April 1964. We recommend that you obtain detailed information before taking any investment decision. Investments should be made on the basis of the current prospectus, KIID (key investor information document) and Additional Information for Investors, which is available along with the current annual and semi-annual reports free of charge from our distributors, from our European Service Centre in Luxembourg FIL (Luxembourg) S.A. 2a, rue Albert Borschette BP 2174 L-1021 Luxembourg and the representative office in Poland.Issued by FIL Investments International (FCA registered number 122170) a firm authorised and regulated by the Financial Conduct Authority, FIL (Luxembourg) S.A., authorised and supervised by the CSSF (Commission de Surveillance du Secteur Financier) and FIL Investment Switzerland AG, authorised and supervised by the Swiss Financial Market Supervisory Authority FINMA. FIPM 1119

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Fixed Income Monthly