Fidelity International to launch Enhanced Income Fund

Fidelity International is launching the Fidelity Enhanced Income Fund, a new fund for investors looking for a high level of regular income, on 2 February 2008.

Managed by Michael Clark, who has 22 years of investment experience, FIF Enhanced Income Fund will aim to deliver a yield of 150-200% of the FTSE All-Share Index yield (net of basic rate tax). The fund's estimated yield at launch will be 7.1% which is based on 150% of the prevailing FTSE All-Share Index yield of 4.75% as at 15.01.09 (net of basic rate tax). This yield is not guaranteed and will fluctuate in line with the yield available from the market over time. The fund will build both on Fidelity's fundamental investment approach and on Fidelity's derivatives expertise. It is designed to be more flexible than traditional equity income funds.

The core portfolio will be based on the Fidelity Income Plus fund, an equity income fund run by Mr Clark since July 2008, which invests in 40-60 high yielding stocks. In addition to the base dividends, the fund will generate additional income from writing covered call options. David Jehan, Director, Derivatives who joined Fidelity in 2007, will work closely with Michael Clark to manage the covered call overlay strategy.

The fund has therefore two sources of income, and consequently can deliver a higher yield than that available to traditional equity income funds, which derive their yield from dividends alone.

Mr Clark comments: "The fund's launch coincides with interest rates being at an historic low, so savers have to look at alternative sources to maintain their income - interest income on bank and building society accounts has fallen dramatically.

"We are entering a period of time when dividend income will be a crucial component of shareholder returns. This fund offers a simple and transparent method of enhancing that income.

The FIF Enhanced Income Fund has a reduced initial charge of 3.0% (until 30 April 2009) and an annual management charge of 1.5%. The minimum investment in the fund is £1,000 and £500 for top-ups. The fund will also be available for regular savings plan (with a monthly minimum of £50) and for regular withdrawals through the Fidelity withdrawal plan. Income will be paid quarterly and the fund is available within ISA and SIPP wrappers. Initial commission for advisers will be 3% with an on-going commission of 0.5% pa.