Fidelity Wealth Builder Fund

FIDELITY INTERNATIONAL

January 2009
 Where are we ?
FIDELITY INTERNATIONAL

Last year has seen unprecedented volatility in equity market

BSE Sensex has reached 2006 levels

Economic growth is slowing

Inflation is easing

Central banks across the globe taking measures to provide growth stimulus

Sharp rally in Government bonds

Oil down approx 70%* from all time high in July 2008

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* As on 31st December 2008
 What’s going on in investor’s mind
FIDELITY INTERNATIONAL

Stock market has gone back

Economy is slowing down Interest rates coming down
to 2006 levels

Where should I Should I move out of

put my money ? equities?

How can I avail of the best

Do bonds make sense?
investment opportunity?

Current environment is likely to stir up many different thoughts and emotions in a

random – perhaps chaotic – manner

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 FIDELITY INTERNATIONAL

“You get recessions, you have stock market declines.

If you don't understand that's going to happen, then
you're not ready, you won't do well in the markets” –
Peter Lynch

Peter Lynch was the portfolio manager of the Fidelity Magellan Fund from May 1977 to May 1990.
The Fund had $14 billion in assets when Peter Lynch retired in 1990. He is currently a Research
Consultant with Fidelity Investments, USA.

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 What should investors be doing?
FIDELITY INTERNATIONAL

Markowitz and Modern Portfolio Theory

1952
Investors should look at risk as well as return

Investors can construct portfolios which optimise the level of risk for

any expected level of return

Stick to basic principles of investing

Harry
Markowitz
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 Portfolio structuring
FIDELITY INTERNATIONAL

Why seek portfolio balance?

Risk & Return

The principle of diversification

The six facets of a diversified portfolio

Asset allocation Security specific risk

Market cap bias Sector exposure

Geographic location Investment style

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 FIDELITY INTERNATIONAL

The case for asset allocation

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 Importance of asset allocation
FIDELITY INTERNATIONAL

91.5%

Impact on variability
of return

8.5%

Asset allocation Security selection

Source: Brinson, Hood, and Beebower ‘Determinants of Portfolio Performance II – an update’ Financial Analysts Journal, May/June 1991

Asset allocation is regarded as one of the important decisions an investor makes:

91.5% of investment return variability is driven by asset allocation decisions

8.5% of investment return variability is attributed to security selection and market

timing

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 Asset classes may not move in the same direction
FIDELITY INTERNATIONAL

2001 2002 2003 2004 2005 2006 2007 2008

22.46% 15.68% 72.89% 13.08% 42.33% 46.70% 47.15% 20.78%

8.98% 8.55% 29.43% 4.86% 17.19% 17.87% 20.10% 7.73%

4.52% 6.45% 9.95% 4.64% 5.78% 6.14% 7.87% -7.98%

-17.87% 3.52% 5.45% -3.15% 3.47% 0.76% 5.29% -52.45%

Equities Debt Cash Composite

8 year CAGR
Equity: 11.71% Cash: 6.62%
Debt: 9.06% Composite: 11.27%

Effective portfolio diversification can be achieved through

combination of asset classes
Performance of equities, debt and cash is based on BSE Sensex, NSE G-Sec Composite Index and NSE T-Bill Index respectively. Performance of
composite is calculated as average of equities, debt and cash. CAGR for composite is based on assumption that composite is rebalanced at the end of
every calendar year.

Source: ICRA MFIE

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 Asset allocation can reduce downside risk
FIDELITY INTERNATIONAL

If equities go down by

10% 20% 30%

15% 5.30% 3.80% 2.30%

Portfolio equity
exposure

30% 2.60% -0.40% -3.40%

50% -1.00% -6.00% -11.00%

For illustrative purpose only

For portfolios invested in debt and equity. Assuming 8% return on debt component

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 FIDELITY INTERNATIONAL

Asset allocation in current environment

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 Asset allocation and economic cycle
FIDELITY INTERNATIONAL

The Investment The Investment Clock

Clock is an asset
allocation tool Inflation rises
which can be used
to identify which Recovery

Growth moves below trend

Overheat
asset classes and

Growth moves above trend

equity sectors
should perform
well as the
economy moves
through the four
phases of its
cycles.

We are in the
Reflation Stagflation
bond friendly
Reflation Inflation falls
phase

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 Moderating growth & lower inflation favour bonds
FIDELITY INTERNATIONAL

GDP Growth (%)

12
9.4 9.6
10 9.0
8.5
7.5
8 6.8
5.8 5.5
6
4.4
3.8
4

0
01 02 03 04 05 06 07 08 09E 10E

IIP Vs. Inflation

10 14
8 12

6 10
8
4
6
2
4
0
2
IIP Growth (%) WPI Growth (%) - RHS
-2 0
Jan-08 Feb-08 Mar-08 Apr-08 May-08 Jun-08 Jul-08 Aug-08 Sep-08 Oct-08 Nov-08 Dec-08
Source: Bloomberg, Citibank, E= Citibank estimate
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 Attractive corporate bond spreads
FIDELITY INTERNATIONAL

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3 yr G-Sec Vs 3-yr AAA
12
10
8
6
4 3 yr G-sec 3-yr AAA

2
0
Jan-08 Feb-08 Mar-08 Apr-08 May-08 Jun-08 Jul-08 Aug-08 Sep-08 Oct-08 Nov-08 Dec-08

5 yr G-Sec Vs 5 yr AAA
14

12

10

6
5 yr G-sec 5-yr AAA
4

0
Jan-08 Feb-08 Mar-08 Apr-08 May-08 Jun-08 Jul-08 Aug-08 Sep-08 Oct-08 Nov-08 Dec-08

Source: Bloomberg, as on 31 December 2008

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 Equities…
FIDELITY INTERNATIONAL

…have fallen sharply

25000
20873
20000

15000 -54%

10000 BSE Sensex: 01 Jan 2001 to 31 Dec 2008 9647

5000

0
Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Dec-08

And have been volatile in the recent months

90
80 India VIX Index
70
60
50
40
30
20
10
0
Nov-07 Dec-07 Jan-08 Feb-08 Mar-08 Apr-08 May-08 Jun-08 Jul-08 Aug-08 Sep-08 Oct-08 Nov-08 Dec-08

Source: Bloomberg, as on 31 December 2008

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 But equities also tend to bounce back after such crisis
FIDELITY INTERNATIONAL

1992 stock market crash 2000 Tech Meltdown

5000
7000
Time to recover: 842 days
Time to recover: 1421 days
4000 -54.41% 6000
-56.18%
5000
3000
4000

2000 3000

2000
1000
1000

0 0
22-Apr-92 12-Aug-94 11-Feb-00 2-Jan-04

Source: ICRA MFIE. Past performance may or may not be sustained in the future
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 And its difficult to identify the trough
FIDELITY INTERNATIONAL

2008 credit crisis

25000

20000
- 59.51%

15000

10000

5000 Trough ?

0
08-Jan-08 Dec-08

Opportunity cost of staying out of equities could be high

Source: ICRA MFIE. Past performance may or may not be sustained in the future
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 To summarise…
FIDELITY INTERNATIONAL

Moderating economic growth

Lower inflation
Bonds likely to outperform
Wider corporate bond spreads

softening interest rate scenario

Equities have fallen sharply

Valuations looking attractive Equities cannot be ignored
Risk of missing recovery in equities

Need to have the right asset mix between bonds and equities

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 FIDELITY INTERNATIONAL

Let’s have a look at performance of

various asset allocation portfolios in

similar market situation in the past

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 Performance of various asset allocations – 2001 to 2008
FIDELITY INTERNATIONAL

5,600

5,100

4,600
Equity Bonds 15% equity 30% equity 50% equity
4,100

3,600

3,100

2,600

2,100

1,600

1,100

600
Jun-03

Jun-08
Jun-04

Jun-05

Jun-06
Dec-03

Dec-04

Dec-08
Mar-05

Mar-06
Mar-04
Sep-03

Sep-04

Sep-05

Sep-08
Sep-06
Dec-05
Jun-01

Jun-02

Jun-07
Dec-06

Dec-07
Mar-08
Sep-02

Sep-07
Dec-00

Dec-01

Dec-02
Sep-01

Mar-03

Mar-07
Mar-01

Mar-02

Performance of equities and bonds is based on BSE Sensex and NSE G-Sec Composite Index respectively. Portfolios
reset to original allocation at monthly intervals.

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Source: ICRA MFIE. Past performance may or may not be sustained in the future.
For illustrative purpose only.
 Choosing the right portfolio mix
FIDELITY INTERNATIONAL

Efficient Frontier - Two Asset Classes - 2001 to 2008

13%
Most efficient allocation
12%
(Highest risk-adjusted return)
11%
CAGR

10%
100% equity, 0% debt 95% equity, 5% debt 90% equity, 10% debt
9% 85% equity, 15% debt 80% equity, 20% debt 75% equity, 25% debt
70% equity, 30% debt 65% equity, 35% debt 60% equity, 40% debt
8% 55% equity, 45% debt 50% equity, 50% debt 45% equity, 55% debt
40% equity, 60% debt 35% equity, 65% debt 30% equity, 70% debt
7% 25% equity, 75% debt 20% equity, 80% debt 15% equity, 85% debt
10% equity, 90% debt 5% equity, 95% debt 0% equity, 100% debt
6%
0% 4% 8% 12% 16% 20% 24% 28%
Annualised Std deviation
Equity Bonds 15%Equity 30% Equity 50% Equity

Return (CAGR) 11.71% 9.06% 9.95% 10.68% 11.38%

Risk 26.39% 6.83% 7.42% 9.74% 14.03%
Sharpe ratio 0.14 0.16 0.26 0.27 0.24
Performance of equities and bonds is based on BSE Sensex and NSE G-Sec Composite Index respectively. Portfolios reset to original allocation at
monthly intervals. Risk free rate used: 8%. Risk is represented by annualised standard deviation of monthly returns of the portfolios.
Source: ICRA MFIE. Past performance may or may not be sustained in the future.
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For illustrative purpose only.
 In short…
FIDELITY INTERNATIONAL

Bonds outperformed equities from 2001 to Mid 2003

Equities outperformed bonds from mid 2003 onwards

However, HYBRID PORTFOLIOS with 15-50% exposure to equities HAVE

DELIVERED THE BEST RISK-ADJUSTED RETURN over the period

analysed

Its difficult to make a timely shift from one asset class to another

The best strategy is to opt for an asset allocation which delivers

maximum return at desired risk level
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 FIDELITY INTERNATIONAL

Introducing

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 Product structure
FIDELITY INTERNATIONAL

An open ended fund-of-funds scheme

Provides a choice of three plans:

Plan A : around 15% of net assets in equity schemes, rest in debt schemes

Plan B : around 30% of net assets in equity schemes, rest in debt schemes

Plan C : around 50% of net assets in equity schemes, rest in debt schemes

Will predominantly invest in Fidelity’s domestic funds

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 Investment approach
FIDELITY INTERNATIONAL

Traditional stock-picking fund Bottom-up approach

Asset allocation funds Top-down approach

Asset allocation funds invest in stock-picking products

The two approaches complement each other

Source: FIL.

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 Investment Process
FIDELITY INTERNATIONAL

Fund Manager

ASSET ALLOCATION FUND SELECTION

z Plans with pre-set asset z Alpha generation: Stock-picking

allocation
z Advice on plan selection:
To be provided by Advisers
z Market Beta: Taken care of
by right mix of asset classes
– Strategic & Tactical
Allocation
Source: FIL.
by portfolio managers of
underlying funds to generate
alpha
z Key inputs: Continuous PM
interactions over a long period
of time. A broad range of other
inputs, including
macroeconomic factors, market
valuation, chart analysis, risk
adjusted returns, fund flows and
investor sentiment

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 Product Positioning
FIDELITY INTERNATIONAL

Suitable for relatively risk-averse investors looking to participate in equities to benefit

from potential recovery

Can help in capitalising on the existing opportunities in equities and bonds

Combines top-down and bottom-up approach – Combination of alpha and beta

strategies

Combines best of Fidelity’s funds in one fund

Varying styles of underlying funds gives diversification benefit including style

diversification

Investors can easily shift from one plan to another without any load

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 Why invest in Fidelity Wealth Builder Fund?
FIDELITY INTERNATIONAL

Disciplined Asset Allocation

Asset allocation key driver of variability of investment returns

Portfolio diversification and downside protection

Low cost product

No entry load

Load free switches between plans

Benefit of lower expense ratios in the underlying funds

Simple, easy to understand product

Pre-set asset allocation

Advisers can help choose the right plan based on investors’ risk profile and return expectations

Equity exposure for an investor can be increased or decreased by load free switches between
plans

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 Why invest in Fidelity Wealth Builder Fund? (contd.)
FIDELITY INTERNATIONAL

Portfolios invested in debt and equity products with track record

Economic cycle is in favour of bonds

Advantage of investing in quality bond portfolios

Positioned to benefit from a controlled exposure to equities as and when market recovers

Investment in equity portfolios that have gained ground in difficult times

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 Key Fund Facts
FIDELITY INTERNATIONAL

Plan A: 85% Crisil Composite Bond Fund Index & 15% BSE 200

Benchmark
Plan B: 70% Crisil Composite Bond Fund Index & 30% BSE 200

Plan C: 50% Crisil Composite Bond Fund Index & 50% BSE 200

Entry load – NIL

Load structure
Exit load 1% if redeemed within 12 months from the date of
allotment

Minimum investment Rs.5000

Plan A and Plan B: Quarterly, Plan C: At the discretion of the

Dividend Frequency
Trustees

Available now (Auto-debit facility at NFO)

Systematic Plan
Minimum amount of each instalment Rs 500

Minimum aggregate amount Rs 5000 Minimum 6 instalments

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 Dates to remember
FIDELITY INTERNATIONAL

New Fund Offer opens on: January 14, 2009

New Fund Offer closes on: February 5, 2009

Scheme re-opens for

continuous sale and March 2, 2009
re-purchase:

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 Performance track record – Equity funds
FIDELITY INTERNATIONAL

Equity Funds – CAGR (%) as on 31-12-2008

FEF Bm FISSF Bm FIOF Bm FIGF Bm

1 year -50.24 -56.36 -52.02 -56.36 -45.80 -51.06 -49.94 -56.36

3 years 3.59 -0.84 NA NA NA NA NA NA

Since inception* 13.95 8.34 -4.38 -3.91 -22.76 -21.46 -39.98 -42.81

As per SEBI standards for performance reporting, the since inception return is calculated on NAV of Rs. 10/- invested
at inception. For this purpose, the inception date is deemed to be the date of allotment, i.e. 16-May-05 for FEF, 22-
May-06 for FISSF, 28-May-07 for FIOF and 23-Oct-07 for FIGF. Past performance may or may not be sustained in the
future. Source: ICRA MFIE, Fidelity

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 Performance track record – Fixed income funds
FIDELITY INTERNATIONAL

3 months 6 months 1 year Since inception

FCF - Retail 8.83 8.54 8.20 7.86
FCF - IP 9.24 8.96 8.63 8.29
FCF – Super IP 9.37 9.04 8.70 8.41
Benchmark 10.13 9.43 8.41 7.88

FLPF – Retail 2.23 4.38 8.41 8.23

FLPF – IP 2.34 4.59 NA 7.70
FLPF – Super IP 2.37 4.65 8.96 8.77
Benchmark (Retail & Super IP) 2.59 4.75 8.41 8.04
Benchmark (IP) 2.59 4.75 NA 7.61

FSTIF - Retail 5.84 7.68 10.79 8.56

FSTIF – IP 5.89 7.79 11.01 8.78
Benchmark 5.00 6.70 9.50 8.20

FFGF 24.94 NA NA 22.66

Benchmark 20.56 NA NA 23.07
As per SEBI standards for performance reporting, the since inception return is calculated on NAV of Rs. 10/- invested
at inception. For this purpose, the inception date is deemed to be the date of allotment, i.e. 27-Nov-06 for FCF, 20-Sep-
07 for FLPF-Retail and FLPF – Super IP, 18-Feb-08 for FLPF – IP, 30-Aug-06 for FSTIF and 07-Aug-08 for FFGF. For
FCF, return for periods less than 1 year are simple annualised and for periods greater than or equal to 1 year is CAGR.
For other funds, return for periods less than 1 year are absolute and those for more than or equal to 1 year are CAGR.
Past performance may or may not be sustained in the future. Source: ICRA MFIE, Fidelity. As on 31-12-2008.

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 FIDELITY INTERNATIONAL

Thank You

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 Important Information
FIDELITY INTERNATIONAL

Scheme Classification: An Open - ended fund of funds scheme comprising of three plans. Investment Objective: Plan A - To seek to
generate reasonable returns by investing predominantly in the Debt Scheme(s) and around 15% of the net assets of the Plan in the
Equity Scheme(s). Plan B - To seek to generate reasonable returns by investing predominantly in the Debt Scheme(s) and around
30% of the net assets of the Plan in the Equity Scheme(s). Plan C - To seek to generate reasonable returns by investing at least 50 %
of the net assets of the Plan in the Debt Scheme(s) balanced with generation of long – term capital growth by investing around 50 %
of the net assets of the Plan in the Equity Scheme(s). ▪ Normal Asset Allocation: Plan A - Debt Schemes – 70 to 100%; Equity
Schemes – 0 to 30%; Money market instruments – 0 to 30%. Plan B - Debt Schemes – 55 to 85%; Equity Schemes – 15 to 45%; Money
market instruments – 0 to 30%. Plan C - Debt Schemes – 30 to 70%; Equity Schemes – 30 to 70%; Money market instruments – 0 to
40%.

Terms of issue: Units of Rs. 10 per unit for cash during the new fund offer and at applicable NAV thereafter. Minimum initial
application amount: Rs. 5,000 per Plan per application. Minimum redemption amount/units: Rs. 1,000 or 100 Units in respect of each
Plan. Scheme Information Document, Key Information Memorandum and Application Forms will be available at the ISCs/distributors’
offices. General Services: Investors can contact us at the toll-free number “1800-200-0600”. NAVs will be calculated on every
business day and published in two daily newspapers on all business days. Redemption on all business days. ▪ Loads - Entry: Nil.
Exit: For redemption within 12 months from the date of allotment or purchase applying First in First Out basis – 1.00%. A switch-out
will also attract an Exit Load like any Redemption. No Entry / Exit Loads / CDSC will be chargeable in case of switches made between
different options of the same Plan or between different Plans within the Scheme.

Risk factors: ▪ Mutual funds, like securities investments, are subject to market risks and there is no guarantee against loss in the
scheme or that the scheme’s objectives will be achieved. ▪ As with any investment in securities, the NAV of the units issued under
the scheme can go up or down depending on various factors and forces affecting capital markets. ▪ Past performance of the
Sponsor/the AMC/the Mutual Fund does not indicate the future performance of the scheme. ▪ Fidelity Wealth Builder Fund is the
name of the scheme, and this does not in any manner indicate the quality of the scheme, its future prospects or returns. ▪ Investing
in the Scheme involves certain risks and considerations associated generally with making investments in the Underlying Schemes
and the AMC’s investment decisions to choose the Underlying Schemes may not be always profitable. There can be no assurance
that the Underlying Schemes’ will achieve their objectives. The Scheme’s performance will be affected by the performance
Underlying Schemes in which the investments are made. Investors will be bearing the expenses of a Plan in addition to the expenses
of the relevant Underlying Scheme in which the Plan will make investments. ▪ Please read the Scheme Information Document of the
scheme carefully before investing.

Statutory: Fidelity Mutual Fund (‘the Fund’) has been established as a trust under the Indian Trusts Act, 1882, by FIL Investment
Advisors (liability restricted to Rs. 1 Lakh). FIL Trustee Company Private Limited, a company incorporated under the Companies Act,
1956, with a limited liability is the Trustee to the Fund. FIL Fund Management Private Limited, a company incorporated under the
Companies Act, 1956, with a limited liability is the Investment Manager to the Fund. Fidelity, Fidelity International and Pyramid Logo
are trademarks of FIL Limited.
CI01101

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