Fidelity Funds – ASEAN Fund

01-2015

Monthly Fund Review

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Please Note: This fund invests primarily in equity securities in Singapore, Malaysia, Thailand, Philippines and Indonesia. The fund is subject to investment, equities, emerging markets risk specific to the ASEAN market and foreign currency risk. This fund can invest in derivative instruments which may involve additional risks. (For example, leverage may cause greater volatility.) Investors may suffer substantial loss of their investments in the fund. Investor should not invest in the fund solely based on the information provided in this document and should read the prospectus (including potential

risks involved) for details.

Fund Manager: Gillian Kwek As of 31 December 2014

Market EnvironmentEquities in the Association of South East Asian Nations (ASEAN) declined over the quarter as falling commodity prices and concerns over global growth weighed on investor sentiment. Malaysian equities fell as weakening crude oil prices are likely to hurt the country’s oil-export revenues. Thai equities also declined due to weakness in the resource sector. Meanwhile, the Indonesia market gained as the government unveiled steps to reduce its fuel subsidy bill and fund development plans. The Philippines market also rose amid expectations that declining oil prices should boost consumption. On the economic front, weak investment and exports decelerated growth in Malaysia and Indonesia. Recovery in the Thai economy was lacklustre due to sluggish exports. Advance data for the fourth quarter showed that the Singaporean economy slowed as manufacturing activity contracted. On the policy front, Bank Indonesia raised its benchmark interest rate to curb inflationary risks, and the Malaysian government abolished fuel price subsidies to reduce its fiscal deficit. At a sector level, energy and materials tracked resource prices lower. Industrials and consumer companies also declined. Conversely, the telecommunications and utilities sectors outperformed the broader market.

Fund PerformanceThe fund underperformed the index over the quarter. Security selection among financials and consumer companies detracted from returns. Meanwhile, selected industrials supported performance.

Financials and consumer companies detracted from returns Malayan Banking declined as it reported weak results and as

the growth outlook for Malaysia’s banking sector moderated. In the consumer staples sector, the position in Indonesian animal feed producer Malindo Feedmill retreated as high costs and slower demand weighed on its results.

Pacific Radiance weighed on performance The offshore oilfield services provider was the largest

detractor from returns as shares in oil sector-related companies declined. Elsewhere, in the health care sector, medical gloves maker Supermax hurt performance as production constraints and lower selling prices weighed on its results. Moreover, its key executives were charged with insider trading at a Malaysian court, which further impacted its shares.

Industrials added value Pembangunan Perumahan and Wijaya Karya supported

returns as the Indonesian construction services companies are likely to benefit from the government’s focus on boosting infrastructure development. Additionally, shares in Malaysia-based online employment search provider JobStreet gained as the Singaporean regulator approved the acquisition of its online employment business by Australia’s SEEK.

Fund PositioningI continue to focus on market share gainers and companies that are exposed to regional growth. I prefer companies with managements that have a strong performance track record. In particular, the fund is overweight in the infrastructure, banking, health care and information technology sectors.

Bias towards banks ASEAN banks generally have a solid capital base and good

asset quality. I like Thailand’s Kasikornbank due to its solid execution and strong small and medium sized enterprise franchise. The fund holds Bank Rakyat Indonesia for its strong deposit franchise and upbeat growth outlook.

Overweight in health care I like Singapore-based Raffles Medical Group for its solid

earnings visibility, supported by strong demand and capacity expansion. Potential expansion opportunities in China should further enhance its long-term earnings profile.

Positive on infrastructure-related companies I have a high-conviction position in Philippines-based Metro

Pacific Investments due to solid growth prospects for its toll road business, which is yet to be appreciated by investors. Additionally, I like Singapore-based transport operator ComfortDelGro for its geographically diversified and healthy earnings profile. Furthermore, it is likely to benefit from the Singapore government’s policy to revamp the public bus industry.