Introducing Fidelity Multi Asset Navigator Fund

Fidelity Funds - Multi Asset Navigator Fund is the next level of asset allocation fund that not only offers exposure to bonds, equities and cash, but also property and commodities to improve diversification and enhance performance. As a result, the fund can tap into an array of opportunities around the world to which many other funds do not otherwise have access; reducing the overall risk of the portfolio without forgoing returns. In addition, the asset mix will change through time to reflect a blend suitable for the appropriate stage of the global economic cycle. This allows investors to hold onto the same fund throughout the cycle, without resorting to the familiar pattern of buying and selling in response to every move in the markets.

WHAT IS YOUR OUTLOOK AS WE MOVE FURTHER INTO 2007?

In recent months I have favoured bonds and property over equities, but there are now early indications that there could be plenty of steam left in the world stock markets. Global growth trends remain strong with unemployment rates falling in all the major economies. But now it looks like the lead indicators I monitor are coming off their lows. In addition, the strength in commodity prices suggests the world economy has worked off its excess inventories and factory production could re-accelerate. Meanwhile, economists are starting to upgrade their forecasts for GDP growth, particularly in European economies. The news out of China is encouraging - year-on-year GDP jumped by more than 11 per cent in the first quarter [1] on the back on increased investments and booming exports - and global business confidence may be picking up.

Other factors are also supportive of higher equity prices. Money supply growth - a broad measure of liquidity - is strong in Europe and increasing in the US; global stocks look cheap versus bond and relative price momentum still favours stocks over commodities, cash and bonds.

ARE THERE ANY RISKS?

Yes, I do think there are two risks worth monitoring that may yet upset the equity cart. First, and most important, the US housing market downturn could spill over into more pronounced US consumer weakness with knock-on-effects for the rest of the world. So far, wage growth is strong and US unemployment rate is near its cycle lows, supporting the consumer. We are monitoring the situation closely.

The other concern relates to geopolitics. If the war of words between the US administration and the government of Iran escalates into open armed conflict, it could drive the oil price and infl ation much higher. Again, we are monitoring developments and would tilt the exposure of our multi-asset funds towards commodities and cash if necessary.

HOW DO YOU CONSIDER ALL THESE FACTORS WHEN MAKING ASSET ALLOCATION DECISIONS?

In deciding the amount of money to allocate to each of the asset classes of a balanced fund that spans stocks, bonds, commodities, property and cash, I use an "Investment Clock" approach based on my interpretation of the trends and cycles in the global economy. It all boils down to two things: growth and infl ation. Bonds and property tend to do well when growth is weak, infl ation is falling and central banks start to cut rates. Stocks do best in the early disinfl ationary recovery. Here inflation is still trending downwards and interest rates are low but increased sales volumes mean corporate profi ts are growing strongly.

Commodities take the lead when inflation is rising - as we have seen recently - the world economy is over-heating and raw materials are in short supply. Finally, cash is the safest option if infl ation and interest rates continue to rise against a weak growth backdrop.

With the benefit of hindsight it is a fairly easy to identify where the phases start and fi nish. As investors working in real time we don?t have the luxury of knowing what comes next and, given the time lags in economic data releases, it is often difficult to pinpoint what is happening today. We have to rely on what I call "nowcasting". This means that rather than trying to make long-term economic forecasts, our interest is in the directional trends we see in key indicators today and whether they are suggesting a move into - or at least towards - another phase.

HOW OFTEN WILL THE ASSET ALLOCATION OF THE FUND CHANGE?

The major asset allocation is reviewed on a monthly basis. However, I am free to change the asset allocation on other days if circumstances dictate and daily rebalancing of the positions will be done to manage cash fl ows.

ARE INVESTORS LIKELY TO SEE DRAMATIC CHANGES IN THE PORTFOLIO COMPOSITION OVER TIME?

Any asset reallocation is likely to be achieved through a gradual process that reflects the slow movement of the economy from one phase to another. While the model does suggest four different portfolios depending on the phase of the economic cycle, the migration from one to the other will be achieved progressively rather than through large step-changes.

IS ANYONE ELSE INVOLVED IN THE MANAGEMENT PROCESS OF THE FUND?

I work closely with Richard Skelt in the Investment Strategies Group and with Fidelity?s Asset Allocation Group. This Group comprises individuals drawn from all of FIL's regional offi ces and convenes monthly by conference call and quarterly at face-toface meetings. It reviews a broad range of inputs and agrees what mix of assets are most appropriate for Fidelity?s asset allocation products.

While Fidelity has long been acclaimed for the strength of its bottom-up stock picking skills, Fidelity Funds - Multi Asset Navigator Fund allows us to bring two alternate disciplines together into a balanced approach where our top-down analytical skills meet and complement our traditional bottom-up strengths.

WHAT IS THE RISK PROFILE OF THE FUND?

The fund is considered to be low to medium risk. This is based on the fact that it will have no less than 30% in bonds and cash at any time and the Fund also benefits from diversifi cation between asset classes. While no guarantee of downside protection can be given, the asset mix will be adjusted to reflect the prevailing trading conditions and the Fund should therefore be more resilient than pure equity-based funds.

SO HOW ARE YOUR CURRENT VIEWS REFLECTED IN THE FUND?

If my interpretation of the economic cycle is right, shares-rather than bonds, property or cash- should account for an increasing weight in the portfolio. Doomsayers are always looking for an "end game" to the current extraordinary global expansion. Maybe this is it. But maybe this is only the beginning of the end.

Trevor Greetham, Portfolio Manager of Fidelity Funds - Multi Asset Navigator Fund, joined Fidelity in January 2006 as Asset Allocation Director. He is a member of the Asset Allocation Group (AAG) and manages Fidelity Funds - Growth & Income Fund, as well as Fidelity Funds - Multi Asset Strategic Fund* and Fidelity Investment Funds - Multi Asset Strategic Fund*, which are European versions of Fidelity Funds - Multi Asset Navigator Fund. Trevor has 15 years? investment industry experience. Prior to joining Fidelity, Trevor spent 10 years at Merrill Lynch, where he was Director of Asset Allocation. Before that, Trevor was an assistant fund manager and actuary for Provident Mutual. He has an MA in Mathematics from Cambridge University. * Please note that the Fund is not registered for sale in Singapore.

[1] Source : Bloomberg. As at May 2007.

This document is prepared by Fidelity Investments (Singapore) Limited ["FISL"] (Co. Reg. No.: 199006300E), a responsible entity for the fund(s) in Singapore. All views expressed cannot be construed as an offer or recommendation. Prospectus for the fund(s) is available from FISL or its distributors upon request. Potential investors should read the prospectus before deciding whether to invest in the fund(s). Reference to specifi c securities or fund(s) is included for illustration only, and should not be construed as a recommendation to buy or sell the same. This document is for information only and does not have regard to the specifi c investment objectives, fi nancial situation and particular needs of any specifi c person who may receive it. Potential investors should seek advice from a fi nancial adviser before deciding to invest in the fund(s). If that potential investor chooses not to seek advice from a fi nancial adviser, he should consider whether the fund(s) in question is suitable for him. Past performance of the manager and the fund(s), and any forecasts on the economy, stock or bond market, or economic trends of the markets that are targeted by the fund(s), are not indicative of the future performance. Prices can go up and down. The value of the shares of the fund(s) and the income accruing to the shares, if any, may fall or rise. Investors investing in fund(s) denominated in a non-local currency should be aware of the risk of exchange rate fl uctuation that may cause a loss of principal when foreign currency is converted back to the investors? home currency. Exchange controls may be applicable from time to time to certain foreign currencies. Fidelity, Fidelity International, and Pyramid Logo are trademarks of Fidelity International Limited. May 2007