European Outlook

Madrid Perspectives Event17 January 2013

Matt SiddlePortfolio Manager Equity

This presentation is for investment professionals only and should not be relied upon by private investors.

Why Invest in a European Fund?

European companies are in better shape than economies

European companies reward shareholders and are cheap in absolute and relative terms

Europe has unique franchises which produce globally competitive products

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Invest in European companies, not just Euro economies

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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Peripheral Europe has lost competitiveness since 1997

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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.

Germany vs. FranceUnit labour costs compared to unemployment rates

Source: Absolute Strategy Research. Left - Annual data as in December 2012. Right - latest available Quarterly data as on 3 January 2012.

Unemployment Rate Higher in France

Unemployment Rate Higher in Germany

Germany vs. France – Unit Labour Cost Germany vs. France – Unemployment Rate

Labour market reform in Germany drove improved job growth

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Relative Eurozone unit labour costs

Source: Absolute Strategy Research, 2 January 2012.

Unit labour costs improving but more needed – especially in Italy & France

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Global economic fundamentals

Source: Left chart - Absolute Strategy Research, latest available on 2 January 2013.

Right chart- Netherlands Bureau for Economic Policy Analysis and Fidelity, December 2012.

US Durable Goods Orders and Shipments Global Industrial Production

Orders have declined, but production has not. This is not 2009.

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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 2012Third 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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Global exposure helps drive EPS growth

Source: State Street, 31 December 2012.Source: State Street, annual data till 2011, latest available on 31 December 2012.

…Europe is ahead on earnings growthDespite lagging European real GDP growth…

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European equities are cheap, absolute & relative

European Market Forward PE European Market PB

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 600.10

Shiller 10 Year Average PE % of European stocks with dividend yields > corporate bond yield

52%

Quality / value matrixLo

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Low Quality to High Quality

Tactical opportunitiesGood businesses with improving fundamentals

Tactical opportunitiesPoorer businesses that are VERY cheap

Buy good businesses with attractive valuations – not just the best businesses

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Source: FIL Limited.

Sweet spot –Strategic focusGood businesses with attractive valuations

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.

Quality focusAdd value and reduce downside risk

21 months 7 months 50 months 78 months

Despair Hope Growth Overall

Quality stocks outperform in long term & do well in difficult times

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DespairGrowth Hope

Long term performance of Matt SiddleReducing downside risk in tough times

UK Portfolios European Pilot

FF European Larger Companies Fund

FF European Growth Fund

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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Career performanceQuarterly excess return vs. Index

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. ComparativeIndex 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.

FF European Growth Q3 2012

Quality focus delivered outperformance, particularly in weaker markets

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FF European Growth Q4 2012

FF European Larger Companies Q3 2012

FF European Larger Companies Q4 2012

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

Performance overview in % (EUR) – 31 December 2012

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.

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

FF European Growth Fund

FF European Larger Companies Fund

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Stock example – WPP

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

Valuation:

11.6x PE, discount to peers and still cheap on EV/Sales vs. historic range

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.

WPP Share Price (rebased)

Investment thesis

Leader in EM marketing services on a cheap valuationVa

luat

ion

Quality

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Stock example – Sanofi

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

Valuation:

11.6x PE, discount to peers and still cheap vs. historic EV / Sales

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.

Sanofi Share Price (rebased)

Investment thesis

Under-recognised growth in most of its businessesVa

luat

ion

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Quality

Why Invest in a European Fund?

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European companies are in better shape than economies

European companies reward shareholders and are cheap in absolute and relative terms

Europe has unique franchises which produce globally competitive products

Invest in European companies, not just Euro economies

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