European Outlook de Event Matt Siddle, Portfolio Manager Equity de Fidelity.

1. European Outlook
Madrid Perspectives Event
17 January 2013
Matt Siddle
Portfolio Manager Equity
This presentation is for investment professionals only and
should not be relied upon by private investors.

2. Why Invest in a European Fund?
European companies are in better shape than economies
Europe has unique franchises which produce globally
competitive products
European companies reward shareholders and are cheap in
absolute and relative terms
Invest in European companies, not just Euro economies
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3. Economic summary
 The European economy requires major surgery
 ECB actions are an anaesthetic, buying more time…
 …but critical questions remain – will politicians seize the opportunity?
Europe needs growth too – 3 options for politicians:
1. Increase government expenditure to ‘buy growth’ in the short term
2. Seek debt forgiveness, exit the € to become cheaper than neighbours
3. Drive long term growth through increased competitiveness
No quick fix – likely to have ongoing macro volatility
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4. Peripheral Europe has lost competitiveness since 1997
Source: Hourly compensation costs in manufacturing, U.S. dollars, and as a percent of costs in the United States Bureau of Labour Statistics, last available data as in
December 2012. (1) With the exception of Estonia, 1997 is the first year data for all countries are available to BLS.
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5. Germany vs. France
Unit labour costs compared to unemployment rates
Germany vs. France – Unit Labour Cost Germany vs. France – Unemployment Rate
Unemployment Rate
Higher in Germany
Unemployment Rate
Higher in France
Labour market reform in Germany drove improved job growth
Source: Absolute Strategy Research. Left - Annual data as in December 2012. Right - latest available Quarterly data as on 3 January 2012.
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6. Relative Eurozone unit labour costs
Unit labour costs improving but more needed – especially in Italy & France
Source: Absolute Strategy Research, 2 January 2012.
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7. Global economic fundamentals
US Durable Goods Orders and Shipments Global Industrial Production
Orders have declined, but production has not. This is not 2009.
Source: Left chart - Absolute Strategy Research, latest available on 2 January 2013.
Right chart- Netherlands Bureau for Economic Policy Analysis and Fidelity, December 2012.
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8. European brands benefit from global growth
Top 100 Global Brands in 2012 according to Interbrand – European names
Source: Interbrand Top 100 Global Brands and FIL, December 2012
Third party trademark, copyright and other intellectual property rights are and remain the property of their respective owners. Brands
circled in red are represented in FF European Growth Fund as at November 2012.
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9. Global exposure helps drive EPS growth
Despite lagging European real GDP …Europe is ahead on earnings growth
growth…
Source: State Street, annual data till 2011, latest available on 31 December 2012. Source: State Street, 31 December 2012.
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10. European equities are cheap, absolute & relative
European Market Forward PE European Market PB
Shiller 10 Year Average PE % of European stocks with dividend yields >
corporate bond yield
52%
Source: Top charts - Datastream, 31 December 2012. Bottom left chart – Absolute Strategy Research, 31 December 2012.
Bottom right chart – Goldman Sachs ECS Research, 30 November 2012. Corporate bond yield is the aggregate European Corporate bond yield (75%
iShares Markit iBoxx Eur Corporate Bonds and 25% iShares Markit iBoxx £ Corporate Bonds). Index used for dividend yields – Europe Stoxx 600.
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11. Quality / value matrix
Tactical opportunities
Good businesses with
improving
fundamentals
Low Valuation to High Valuation
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Sweet spot –
Strategic focus
Good businesses with
attractive valuations
Tactical opportunities
Poorer businesses
1 that are VERY cheap
5 1
Low Quality to High Quality
Buy good businesses with attractive valuations – not just the best businesses
Source: FIL Limited.
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12. Quality focus
Add value and reduce downside risk
Despair Hope Growth Overall
21 months 7 months 50 months 78 months
Quality stocks outperform in long term & do well in difficult times
Source: Fidelity and Societe Generale, based on MSCI Europe Index, Number of months denote the average number of months per cycle. Data is from January 1991 till March
2012. For illustrative purposes only.
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13. Long term performance of Matt Siddle
Reducing downside risk in tough times
European FF European Larger FF European
UK Portfolios Growth Fund
Pilot Companies Fund
Growth Despair Hope
Source: Fidelity & Morningstar Workstation for all data, For Matt Siddle: March 2012. Q3 07 to Q2 08 = UK Unconstrained Pilot ,internal FIL portfolio, Comparative Index used for
reference= FTSE All Share. Q3 08 to Q3 09 = FIF UK Growth + Income Fund, Basis: bid-bid, net income reinvested at UK basic rate of tax in UK Sterling, BM = FTSE All Share,
available to UK investors only. April 10 to September 10 = European Pilot , internal FIL portfolio, Comparative Index used for reference = MSCI Europe. From October 2010 to
December 2012 = FF European Larger Companies Fund, Comparative Index for reference = MSCI Europe. From July 2012 to December 2012 = FF European Growth Fund,
Comparative Index for reference = FTSE World Europe. nav-nav, net of fees, gross income reinvested, in euros. Comparative Index used for reference = MSCI Europe. In Q4 2009
and Q1 2010, Matt was not managing any funds. Pilots - These figures reflect performance of an internal Fidelity portfolio which was not available for purchase by clients. Public
fund performance may differ slightly from this representative performance based on the impact of (1) expenses associated with public fund administration, (2) client inflows and
outflows, and (3) the cash position.
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14. Career performance
Quarterly excess return vs. Index
FF European Larger FF European Larger
Companies Q4 2012 Companies Q3 2012
FF European FF European
Growth Q4 2012 Growth Q3 2012
Quality focus delivered outperformance, particularly in weaker markets
Source: Fidelity & Morningstar Workstation for all data, For Matt Siddle: March 2012. Q3 07 to Q2 08 = UK Unconstrained Pilot ,internal FIL portfolio, Comparative Index used for reference= FTSE All Share.
Q3 08 to Q3 09 = FIF UK Growth + Income Fund, Basis: bid-bid, net income reinvested at UK basic rate of tax in UK Sterling, BM = FTSE All Share, available to UK investors only. April 10 to September 10 =
European Pilot , internal FIL portfolio, Comparative Index used for reference = MSCI Europe. From October 2010 to December 2012 = FF European Larger Companies Fund, Comparative Index for reference
= MSCI Europe. From July 2012 to December 2012 = FF European Growth Fund, Comparative Index for reference = FTSE World Europe. nav-nav, net of fees, gross income reinvested, in euros. Comparative
Index used for reference = MSCI Europe. In Q4 2009 and Q1 2010, Matt was not managing any funds. Pilots - These figures reflect performance of an internal Fidelity portfolio which was not available for
purchase by clients. Public fund performance may differ slightly from this representative performance based on the impact of (1) expenses associated with public fund administration, (2) client inflows and
outflows, and (3) the cash position.
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15. Performance overview in % (EUR) – 31 December 2012
FF European Growth Fund
Period Fund Index Excess Rank Count
3 Months 3.1 4.7 -1.6 188 266
6 months (Tenure*) 8.8 12.5 -3.7 238 263
1 Year 17.0 18.8 -1.8 157 257
3 Years 15.86 21.4 -5.5 139 214
FF European Larger Companies Fund
Period Fund Index Excess Rank Count
3 Months 3.0 4.4 -1.4 191 266
6 Months 9.9 12.0 -2.1 207 263
1 Year 20.3 17.3 +3.0 66 257
3 Years 23.8 19.8 +4.1 56 214
Since Tenure** 26.3 14.7 +11.6 7 227
Please note that past performance is not a guide to future performance
Source: Fidelity and Standard & Poor’s. As on 31 December 2012. Basis: nav-nav, gross income reinvested in euros. Excess may not appear to be the
difference between the fund and index returns as they are rounded off to one decimal place.
Comparative Index used for reference for FF European Growth Fund= FTSE World Europe Index. Morningstar peer group - Europe Large-Cap Blend Equity .
*Tenure since 1 July 2012. Comparative Index used for reference for FF European Larger Cos Fund= MSCI Europe Index. Morningstar peer group - Europe
Large-Cap Blend Equity . **Tenure since 1 October 2010.
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16. Stock example – WPP
Quality
Investment thesis
Valuation
Quality:
 Strong in key EM markets (#1 in China &
India), now 30% sales growing at ~10%
 Strong in digital capability, now over 30%
sales and growing at high single digit rates WPP Share Price (rebased)
Valuation:
 11.6x PE, discount to peers and still cheap
on EV/Sales vs. historic range
Leader in EM marketing services on a cheap valuation
Source: Fidelity, Datastream, 31 December 2012, in euro terms. Reference to specific securities should not be construed as a recommendation to buy or sell these securities, but is
included for the purposes of illustration only. Investors should also note that the views expressed may no longer be current and may have already been acted upon by Fidelity.
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17. Stock example – Sanofi
Quality
Investment thesis
Valuation
Quality:
 Investors worry about patent expiries, yet
these products are now only 7% of sales
 ‘Growth Platforms’ like Diabetes and EM are
66% sales and give solid recurring growth Sanofi Share Price (rebased)
Valuation:
 11.6x PE, discount to peers and still cheap
vs. historic EV / Sales
Under-recognised growth in most of its businesses
Source: Fidelity, Datastream, 31 December 2012, in euro terms. Reference to specific securities should not be construed as a recommendation to buy or sell these securities, but is
included for the purposes of illustration only. Investors should also note that the views expressed may no longer be current and may have already been acted upon by Fidelity.
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18. Why Invest in a European Fund?
European companies are in better shape than economies
Europe has unique franchises which produce globally
competitive products
European companies reward shareholders and are cheap in
absolute and relative terms
Invest in European companies, not just Euro economies
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19. Regulatory risk warnings / important notes /
compliance
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