SKANDIA GLOBAL FUNDS PLC - Fidelity Investments

Skandia Global Funds plc
Interim Report and Unaudited Financial Statements for the period ended 30 June 2012
SKANDIA EUROPEAN EQUITY FUND
INVESTMENT ADVISER’S REPORT FOR THE PERIOD ENDED 30 June 2012
Skandia European Equity Fund – GE Asset Management Limited
Below is a report from the Investment Adviser of the Skandia European Equity Fund for the first six months of 2012.
The Skandia European Equity Fund was launched on 13 September 2000 with a starting Net Asset Value per share of EUR 1.00.
Investment Adviser’s Commentary
During the first half of 2012, the Skandia European Equity Fund returned +7.80% outperforming it’s benchmark, the MSCI
Europe GR Index, that produced a return of +4.75 % over the same period.* The Fund achieved big gains and strongly
outperformed the benchmark in the first quarter. Country, sector and stock selection all benefited relative performance. At the
country level, the portfolio’s overweight positioning Germany was a major positive as it was the strongest regional component of
the benchmark. No exposure to Spain, by far the worst performing region, was also beneficial. At the sector level, the portfolio’s
two largest overweight positions were in the two strongest performing sectors – IT and consumer discretionary - thus greatly
benefiting relative returns, while another big plus was having no exposure to one of the worst performing sectors, utilities.
European markets have more reasons to be positive at the end of the first quarter than at the beginning. The long-term refinancing
operation (LTRO) begun by the European Central Bank (ECB) in December has effectively provided a financial back-stop for the
European financial system, facilitating the huge issuance of sovereign debt. Meanwhile Greece has secured another bailout
package, preventing financial melt down. However, with Portugal, Spain and Italy still in a perilous economic condition, the
greater challenge is to implement sufficient reforms, such that a path to longer- term economic growth can be forged despite the
burden of short-term austerity. The progress made in the first quarter has given European leaders the opportunity to address this
challenge over the rest of the year. Risks in the form of the election outcome in France, slowdown in China, unrest in the Middle
East and a stubbornly high oil price could also prove opportunities - should they resolve themselves more positively than the
markets expect. At the same time, continuing signs of an economic upturn in the US provides a positive backdrop for
improvement in Europe.
The Fund outperformed the benchmark over the second quarter. Stock selection was positive, more than offsetting the negative
effect of sector and country selection on the portfolio’s return.
Stock selection was positive in most sectors, particularly in materials, consumer staples, financials and healthcare. At stock level,
the strongest contributors to performance were from holdings in Diageo, Fresenius, Bayer, Gerresheimer and Symrise – all
examples of companies whose leading products, strong brands and diversified customer base have enabled them to continue to
increase earnings despite the difficult economic backdrop.
There were no significant transactions during the quarter. The portfolio remains overweight the consumer discretionary, IT and
materials sectors, and underweight utilities, consumer staples and telecoms. At the country level, an overweight position in
Germany reflects the number of attractively priced companies the manager has found in this market with good earnings growth
prospects due to their global presence and positioning.
Source: Goldman Sachs Asset Management International and GE Asset Management Limited as at 29th June 2012.
* Performance figures refer to Class A shares and are sourced from Morningstar. Calculation basis: bid to bid, net of fees, gross
income reinvested in fund base currency (Euros).
References to benchmarks are for illustrative purposes only and are not intended to imply a performance objective. There is no
guarantee that the Skandia European Equity Fund will outperform this benchmark.
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