Fidelity Strength Brochure_China_

stFriedenligtyt’sh China Time to re-evaluate money.

orAdneewr emerges

China‘s global was also the decade when opportunity to rethink. We are At the core of all these develop- footprint is the unsustainable nature of the convinced that a new world ments stands China. At Fidelity, expanding. world‘s current development order will emerge – is emer- given our long history and sig- At Fidelity, we path broke through into our ging – from this crisis, empha- nificant presence in the country have the ex- collective consciousness and sising or strengthening many of as well as our deep expertise perience and set in motion efforts to bring the trends of the past decade. in its economy and markets, we the expertise to about the fundamental changes This new order will be marked were and still are better posi- handle it. needed to safeguard the planet by ever greater use of tech- tioned for this than most. Even for future generations. nology with all its attendant today, as the shift is underway Bracketed by the Great Finan- opportunities and risks, by the and unstoppable, we see that cial Crisis on the one side and As the novel coronavirus ad- increasing adoption of sustai- the underinvestment in China by COVID-19 on the other, the 2010s vanced across the globe, it took nable practices – not limited Western investors is significant. were a time of deep, accelerating a heavy human toll and brought to but perhaps especially in Look to us to successfully navi- change. The digital revolution entire industries and countries investments – and by a shift of gate the new phase of investing became all-encompassing. A new to a temporary standstill. The the global centre of gravity, in China. middle class gained prominence deceleration it imposed on the economic and otherwise, to in emerging markets – especially global economy also afforded Asia. in Asia and specifically in China – a chance to regroup and an hungry for the lifestyle of their global peers and able to pay for it. Meanwhile, developed societies aged, putting a substantial strain on existing social structures. This

Why China Even before the upheaval of Economic growth – China has as projects such as Belt & Road and 2020, China was on a path of seen great economic growth over the outcomes of the recent National growth, progress and increas- the past years, and it still harbours People‘s Congress demonstrate. ing integration with the world significant potential. Not least economy. Many of the factors because the country‘s leadership Strength in manufacturing – that drove China‘s rise over is determined to continue on the China rose to second place among the past decades remain in growth path. the world‘s economies largely on place and make the country the back of manufacturing prowess. well-positioned to meet the Ambition – The pictures comparing, Even as its economy matures, manu- challenges ahead. The eco- say, Shanghai in 1990 vs now are facturing will remain an important nomy‘s resilience in the face well-known and striking, and they do- factor, with ongoing potential as the of the coronavirus outbreak cument an overarching and histori- sector moves into higher-quality and is a case in point. The factors cally rooted ambition to advance as higher-margin segments. that will continue to undergird a nation. This ambition is undimmed, China‘s success and fuel its ongoing market performance are deeply embedded in socie- ty and go beyond economics.

Ascendancy of consumption – Increased global investor Increasingly, domestic consump- interest – After remaining in tion is becoming the primary relative isolation for decades, driver of the Chinese economic Chinese equity and bond mar- engine. Not only do we see kets are currently going through tremendous growth potential, a prolonged and systematic the trend towards quality and integration into global markets. high-end consumption, known as This has spurred interest abroad, premiumisation, generates which helps support asset additional opportunities. prices. Adoption of technology – Sustainable investment China has shown itself willing potential – The modern and able to quickly and compre- concept of sustainability has hensively adopt new technology. not been closely associated The explicit goal of attaining with China‘s growth story in global leadership in artificial the past. Things are changing intelligence is just one example. rapidly, however, which gene- rates attractive opportunities in Accommodative regulatory this space. regimes – Time and again, the government has shown a willingness to do what it takes to stabilise and support growth, be it on the monetary or fiscal side. The aftermath of the economic crisis caused by the coronavirus has demonstrated this.

Why now While global awareness of Throughout its long commitment to and leadership has the wherewithal opportunities in Asia is growing, modernisation and growth, China to set the economy on this path. This the window of opportunity has shown the ability to weather has opened up significant opportuni- remains open. Many international crises and quickly regain momentum. ties in areas such as IT or sustainable investors are still making efforts to Though China had its first quarter of investing. up their China game and get their negative growth in decades in 2020, exposure to align with various index the base case remains intact. New drivers such as 5G or various weightings. Many Western investors, fields of sustainable technologies are especially Europeans, remain woe- As have other countries and regions just beginning to gain traction in China fully underinvested. Taken together, across the world, China has taken and provide ample opportunities for this creates a robust floor in asset the coronavirus crisis as an oppor- investors – including a first- demand. tunity to recalibrate and redefine mover advantage. goals. It has just done so in a more In line with its ambition to gain in- explicit manner than most, however, fluence and integrate into the world economy, China has triggered a broad range of institutional reforms in financial markets. These include the creation of new exchanges and asset categories that facilitate ac- cess for non-domestic in­vestors.

2,670 CY 2028 11,990 2,020 + 15 % CY 2027 CY 2026 2,094 CY 2025 CY 2024 10,429 1,817 CY 2023 CY 2022 1,658 CY 2021 CY 2020 9,074 1,635 CY 2019 China’s AM market CY 2018 1,325 expected to grow at 15 % p-a., 7,898 1,472 reaching USD 17tn in 2028 1,068 At Fidelity, we expect Chinese asset 6,875 1,325 management to grow by 15% annu- ally over the coming years – 5,987 870 CAGR (%) Inbound 23 a development that will increase 5,215 1,194 Domestic 15 its openness, its sophistication and 4,544 Outbound 11 accelerate the business environment, 714 creating new investment opportunities. 1,045 Source: Fidelity International 2019 591 969 3,960 492 873 413 3,425 787 349 3,010 710

Why Fidelity added value for the investor. Mit Fidelity Wealth Expert Our close collaboration with and müssen Sie sich bei Ihrer Ver- In a word, experience. Fidelity knowledge of local market play- mögensverwaltung um die Per- enjoys a long and successful track ers means that we can make a formance nicht kümmern. Wir record in Asia and particularly in sustainable approach work in treffen für Sie die Entscheidun- China. This includes decades of China like few others, including gen bei Anlage und Rebalan- on-the-ground presence, access having the ability to nudge the cing und steuern gewissenhaft to markets, a close-knit network of behaviour of the companies we die Risiken Ihrer Geldanlage. contacts, and in-depth know-how invest in in the right direction. in the respective segments. In turn, this enables us to uncover hidden Our deep commitment in China pearls as well as provide com- took another significant step prehensive and broad solutions forward on 19 May 2020, when on both the fixed income and the we officially submitted an equities side. Our active approach application to the China Secu- is particularly suited for China‘s rities Regulatory Commission complex economy and markets, (CSRC) for a mutual fund licence. which sometimes lack a bit in Upon approval, Fidelity Interna- transparency. This is where our tional will be able to commence expertise really comes into play a wholly-owned mutual fund and can generate significant business in China. This is just one more reason to look to Fidelity as your partner of choice when investing in China.

Milestones in China 迈伦施泰因 2004 Entered China market and set up Shanghai Representative Office. 2007 • O ffering offshore capabilities to Chinese investors through partnering with banks under the Qualified Domestic Institutional Investor (QDII) scheme. • Dalian Technology Centre established, providing systems and operations support to Asia Pacific and the UK. 2008 Beijing Representative Office established. 2009 China’s National Social Security Fund became the first institutional client in Mainland China. 2011 Started to build up China onshore investment team. 2013 Became the first group of foreign special members of Asset Management Association China (AMAC), and also the first foreign member of the Enterprise Annuities Committee. 2015 Wholly Foreign-Owned Enterprise (WFOE) established in Shanghai, continuing our long-term commitment in China. 2017 • B ecame the first global asset manager to register with the Asset Management Association of China (AMAC) as a private fund management company. • L aunched the first private fund in China, available to eligible Chinese institutional and high-net worth investors. 2018 • Launched two new funds in China including first equity a-share private fund, further diversifying our product offering. • Established a five-year partnership with Ant Fortune to provide research and insight into China´s investment and savings patterns and overall retirement awareness. • A nnounced a strategic partnership with ChinaAMC to serve as research consultant providing advice on the research work of ChinaAMC´s TDF products. 2019 • L aunched the fourth private fund in China. • Hosted the inaugural China Retirement & Investment Forum and released the China Retirement Readiness Survey 2019 in partnership with Ant Fortune.

Risks Enagndagement

The rise of China will Some of these failings present industries while condemning a consequence of the since- go down in history as little more than investment risks others to obscurity. A somewhat abandoned one-child policy. a defining develop- that can be analysed and over-stretched domestic debt This is atypical for a country at ment of our era. Led by mitigated with the proper port- situation – on both the house- its stage of economic develop- a concerted ambition, folio management. We count hold and the business side, and ment and, given the absence China has lifted more among these basic inscruta­bility especially as pertains to real of a safety net or an implied people out of poverty of the state interventionist estate – can also be seen as a intergenerational contract, in a shorter time than philosophy, through which sudden systemic risk that has followed has disruptive potential going any country in human and unforeseeable political de- from the growth path chosen by forward. history, and has pulled velopments can disproportionally the Chinese government. And regional emerging impact markets and lift up entire China has an ageing population, economies in its wake. As is to be expected in any transformation of world-historical signifi- cance, China‘s progress has been far from flaw- less, and we would be remiss not to acknow- ledge as much.

China is showing a maintain and even intensify our This is where our sustainable We acknowledge that com- deep commitment engagement in China. For one, investing approach comes panies are unlikely to alter their to the electric car, a we have seen progress over in. Oriented along the three policies overnight. But, over reflection of its prag- the past years and are confi- dimensions of environmental, time, we believe the founda- matic and growth- dent that China will continue to social and governance (ESG), it tion we have laid will support oriented approach to make strides on these issues includes strict controls at every greater and swifter shifts than sustainability – and a going forward. And, secondly, stage of the investment process would be the case if we cut our potential investment if we pull back from China, we and starts with the onboarding engagement. This will not only opportunity as elec- will have lost any leverage we of potential investee compa- benefit consumers and inves- trification accelerates might have had to create a nies. Our proprietary sustain- tors but also local labourers and all over the world. positive impact. ability rating allows us to track the broader population. a company‘s progress over There are deeper concerns. time and to compare companies Conditions in Chinese factories across regions and industries. are often exploitative, rife with labour rights problems and en- vironmental neglect that arise from an overarching system that includes political oppres- sion and human rights abuses. This is not something we take lightly. Nevertheless, we have taken an active decision to

Forecast Projected plug-in electric car production 2021 China in 1.000 per units 6843 US 3058 Germany 2247 Japan 1023 France 763 South Korea 632 Source: Statista, August 2020

SoOluurtions

Chinese At Fidelity, catch up is not The Chinese fixed income investors should be seen as a markets – our game. We have al- and equity markets are development of world-historical increasing ways sought to be ahead among the largest and most significance. Such a vast new access of the curve by partnering diverse in the world. This pool of risk and return sources with Chinese firms, setting makes them essential for opens up great opportunities up mainland branch of- any investors with more than for diversification, duration fices, and being granted regional ambitions. How- management and portfolio the requisite quotas and ever, even as accessibility building, creating a rush of new licenses. We were able has improved, their structure investment. This is bound to to launch funds early and remains unfamiliar to many accelerate as Chinese bonds build our business contin- outsiders, due to historical become included in global uously, so that today, as circumstance and current fixed income benchmarks and the market opens further, policies. the leading rating agencies we have a unique pres- expand their coverage, leaving ence, broad capabilities, Offshore opportunities in many Western investors to play and a suite of established Chinese fixed income have catch up. In contrast, Fidelity en- solutions in place. existed internationally for some joys a broad and well-ground- time, but access to the onshore ed advantage in China, based market is key, as it represents on a long history and tenacious around 90% of the total volume. efforts to always maximise the This has only been granted possibilities. With the access more recently. The opening we can provide, you can gain of the Chinese fixed income the exposure you seek. market – the second-larg- est in the world – to foreign

FF – China High Yield Fund FF – China RMB Bond Fund The fund invests primarily in high-yielding, subinvestment The fund primarily invests in investment grade Renminbi grade or non-rated securities of issuers that have their head (RMB) denominated corporate bonds. The fund is managed office or the majority of their activity in the Greater China re- according to Fidelity’s active philosophy and approach to gion (including China, Hong Kong, Taiwan, and Macau). This fixed income investing. This is team-based but led by the fund will suit investors seeking high income and who are pre- Portfolio Manager to generate attractive risk-adjusted returns pared to accept the associated risks.. The fund is managed through combining multiple, diversified investment positions according to Fidelity’s active philosophy and approach to advised by in-house fundamental credit research, quantitative fixed income investing, with a very strong focus on individual modelling and specialist traders. security selection and active due diligence. This is team-ba- sed but led by the Portfolio Manager to generate attractive The fund will invest in RMB denominated bonds, money mar- risk-adjusted returns through combining multiple, diversified ket securities, cash and/or cash equivalents. The fund aims investment positions advised by in-house fundamental credit to provide income and capital growth. research, quantitative modelling and specialist traders. The fund will invest at least 70% in high yielding, sub-invest- ment grade or non-rated bonds of issuers that have their head office or exercise a majority of their activities in the Greater China region. The fund aims to provide a high level of current income.



Similarly, the Chinese equity equity market is comprised of FF – China Consumer Fund market‘s recent history has companies listed on foreign been one of gradual opening markets outside of domestic The fund aims to run a concentrated portfolio with relatively to international investors, start- China, e.g. Hong Kong, Singa- high active money, focussing on stocks that have a high ing with a number of offshore pore, US, Japan, UK, Australia return profile as well as the capability to deliver sustainable trading opportunities and quota etc. Different currencies and growth over the long term. In the belief that markets tend schemes. Today, the Chinese varying valuations add a either to underestimate or to overestimate the impact of equity markets are divided into layer of difficulty. Based on our change, we look for investment opportunities in businesses onshore and offshore, with the history and expertise, we can we know well. The position sizes are based on stock-specific former being represented by offer our deep knowhow in factors and portfolio level risk assessment, and the portfolio the two exchanges in Shanghai these markets. Their complexity is likely to offer a more stable cash flow and better earnings and Shenzhen. At a volume lends itself well to our active growth profile, and a lower balance sheet risk versus the of around USD 5 tn, Shanghai approach, through which we market. Such a high-quality portfolio could also be more is the third-largest exchange have been able to generate expensive versus the market. in the world. The offshore significant alpha. The fund will invest at least 70% in the shares of companies having their head office or a main part of their activities in China or Hong Kong. These companies are involved in the development, manufacture or sales of goods or services to consumers in China. The fund aims to provide long-term capital growth.

FF – Greater China Fund FF – China Focus Fund With at least 70% invested in the shares of companies This fund follows combines a value investment style with a quoted on stock exchanges in Hong Kong, China and Tai- bottom-up approach, focusing on determining the intrinsic wan, the fund follows a fundamental, bottom-up approach value of a company rather than themes. The starting point is to generating long-term capital growth through investing to identify intrinsic value at market extremes, whereby the va- primarily in equity securities. The portfolio manager believes luation approach is central to the process. The goal is to find that growth is the key driver of stock price, and that alpha quality business models / management teams that are out of can be generated by identifying and investing in companies favour due to short-term macro factors. This, combined with with good growth prospects. He seeks to identify companies a long-term investment horizon allows for the identification of with good growth prospects, coupled with strong working stocks that are undervalued, but should be beneficiaries of capital, solid cash generation and attractive valuations. China’s structural growth dynamics. Fund management will These companies exhibit four types of growth characteristics: put management on her radar screen for a couple of months turnaround growth, high growth, under-appreciated growth and will meet with several members of the senior manage- or sustainable growth. ment team before investing. There is also a strict evaluation of a company’s financial report. The fund is actively managed and may invest in assets directly or achieve exposure indirectly through other means The fund invests at least 70% in the shares of Chinese including derivatives. The fund aims to provide long-term companies listed in China and Hong Kong as well as non- capital growth. Chinese companies that have a significant portion of their activities in China, and aims to provide long-term capital growth.

For further information about Fidelity’s strengths please contact FIL Investment Switzerland AG FIL Investment Switzerland SA www.fidelity.ch Mühlebachstrasse 54 12, rue du Port www.fidelity.li 8008 Zürich 1204 Genève www.fidelityinstitutional.com Switzerland Switzerland Telephone +41 43 210 13 00 Telephone +41 22 596 19 50 This material is for Investment Professionals only, and should not be relied upon by private investors. View this paper online. Investors should note that the views expressed may no longer be current and may have already been acted upon Important information This material is for Investment Professionals only, and should not be relied upon by private investors. Past performance is not a reliable indicator of future returns. Investors should note that the views expressed may no longer be current and may have already been acted upon. Overseas investments will be affected by movements in currency exchange rates. The price of bonds is influenced by movements in interest rates, changes in the credit rating of bond issuers, and other factors such as inflation and market dynamics. In general, as interest rates rise the price of a bond will fall. The risk of default 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. There is a risk that the issuers of bonds may not be able to repay the money they have borrowed or make interest payments. When interest rates rise, bonds may fall in value. Rising interest rates may cause the value of your investment to fall. The Investment Manager’s focus on securities of companies which maintain strong environmental, social and governance (“ESG”) credentials may result in a return that at times compares unfavourably to similar products without such focus. 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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 are available along with the articles of incorporation as well as the current annual and semi-annual reports free of charge from our distributors, from our European Service Center in Luxembourg FIL (Luxembourg) S.A. 2a, rue Albert Borschette BP 2174 L-1021 Luxembourg and from the representative and paying agent in Switzerland, BNP Paribas Securities Services, Paris, succursale de Zurich, Selnaustrasse 16, 8002 Zurich. Fidelity Funds “FF” is an open-ended investment company (UCITS) established in Luxembourg with different classes of shares. Issued by FIL Investment Switzerland AG. The information provided in this marketing material constitutes an advertisement. The information provided in this marketing material should not be construed as an offer or a solicitation of an offer to purchase or sell the financial products mentioned in this marketing material. Liechtenstein: 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 are 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 as well as from the paying agent in Liechtenstein, VP Bank AG, Äulestrasse 6, 9490 Vaduz. Issued by FIL (Luxembourg) S.A., authorised and supervised by the CSSF (Commission de Surveillance du Secteur Financier). 20CH1102 Photos: iStock, Shutterstock, Gettyimages.