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Two Decades of Finding European Value Omaha, May
2012
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ABOUT US
?     Incorporated in 1987. Shareholder structure 100-owned by Acciona Group (Quoted and Ibex-35 member). Three fund managers and three analysts (one based in Shanghai).   Fund managers Profit sharing agreement and 100 of financial assets invested in the funds.  
     
?     Spains leading independent fund manager   5,7Bn AUM and 37,000 customers (95 equities).  
     
?     Focused on returns not volumes under management. No marketing or distribution agreements.  
     
?     Investment philosophy based on Value Investing. Long only. No leverage. No derivatives. No activism.  
     
?     Two portfolios 20 AUM Iberian (Spain and Portugal) and 80 AUM Global (mainly Europe).  
     
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BESTINVER OUR PERFORMANCE
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COMPARATIVE PERFORMANCE
BESTINVER SPANISH EQUITIES vs. BENCHMARK
YEAR BESTINVER IBERIAN EQUITY BENCHMARK Relative perf.
1993 43,91 46,67 -2,76
1994 5,28 -11,70 16,98
1995 10,33 12,30 -1,97
1996 41,01 38,96 2,05
1997 41,01 42,22 -1,21
1998 29,03 37,19 -8,16
1999 -10,98 16,22 -27,20
2000 13,91 -12,68 26,59
2001 21,22 -6,39 27,61
2002 8,25 -23,10 31,35
2003 38,31 27,44 10,87
2004 29,97 18,70 11,27
2005 27,07 20,56 6,51
2006 37,36 34,49 2,87
2007 4,84 5,60 -0,76
2008 -35,16 -40,56 5,40
2009 34,56 31,37 7,33
2010 3,68 -15,24 18,93
2011 -12,66 -16,23 3,57
30/03/2012 1,55 -3,80 5,35
Return since 1993 1406,51 266,93 1139,58
Average annual return 15,16 7,00 8,16
Returns for BESTINFOND to 31/12/1997 and B.
BOLSA from 01/01/1998 BENCHMARK is a weighted
average of IGBM of IGBM (70) (Madrid Stock
Exchange Index) and PSI (30). All Bestinver
returns are expressed as net, after expenses and
commissions.
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COMPARATIVE PERFORMANCE
BESTINVER INTERNATIONAL EQUITIES vs. MSCI
YEAR B.GLOBAL EQUITY MSCI World Index Relative perf.
1998 -14,13 16,51 -30,64
1999 47,87 44,75 3,12
2000 18,39 -8,24 26,63
2001 16,59 -13,36 29,95
2002 -26,95 -33,02 6,07
2003 32,70 8,83 23,87
2004 19,01 4,71 14,30
2005 30,47 23,95 6,52
2006 24,05 5,51 17,98
2007 -4,61 -3,41 -1,20
2008 -44,71 -39,08 -5,63
2009 71,85 23,02 48,83
2010 25,75 17,16 8,59
2011 -10,07 -4,53 -5,54
30/03/2012 9,36 8,15 1,21
Return since 1998 266,83 17,21 249,62
Average annual return 9,55 1,12 8,43
Returns for BESTINVER INTERNACIONAL MSCI
Morgan Stanley global stock market index All
Bestinver returns are expressed as net, after
expenses and commissions.
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PHILOSOPHY FOUR KEY CORNERSTONES

• GOOD PRICE DUE TO
• Shareholder structure (family owned)
• Type of shares (preferred, non-voting, etc.)
• Geographical reasons business and shareholders
  in different zones
• Long term projects (impatient market)
• Small caps (unnoticed by the market)
• Asset organization (Holdings..)

• COMPANIES WITH
• Competitive advantage
• High ROCE
• Sustainable
• Correct attitude with generated cash-flow

• TIME
• Patience
• Psychological preparation
• Client education

• AUSTRIAN SCHOOL OF ECONOMICS
• Economic general structure
• Human behavior
• Non-predictable consequences in stocks
• Euphoria / Panic

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THE AUSTRIAN SCHOOL
Practical points from the school
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ECONOMIC SCENARIO WHAT SHOULD WE BE LOOKING AT?

• Estimated GDP growth for China in 2012 is 7x
  higher than the potential combined contraction
  for the southern European countries

bn 2007 (1) 2011est (2) 2012est (2) 2015est (3)   Ch. 2012est
Italy 2,116 2,060 2,014 2,042   -45
Spain 1,442 1,417 1,393 1,417   -24
Portugal 232 224 217 223   -7
Greece 305 283 275 275   -8
Total 4,095 3,984 3,899 3,958   -85

China 3,494 7,301 (4) 7,900 10,025   599
Fuente Capital Economics

1. World Bank, current figures.
2. IMF growth estimate.
3. Bestinver growth estimate.
4. Current figure at close of 2011.

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HOW CHINA GROWS

• Average productivity growth of 4 from 1990 to
  2008 ()
• Growth is increasingly driven by internal
  development
• Exports net of imports now hardly contribute to
  economic growth
• 1 in 2011
• Outside the state-owned sector (30 of the
  economy) it is the worlds most flexible and
  dynamic market.
• Despite the surge in investment, the capital
  stock per capita is not even 15 of Koreas.

Chinas rail network is smaller than Americas
was in 1880
Source The Economist , 14 November 2009
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HOW CHINA GROWS (II)

• Very high savings rates of gt50 for families
  this is 20
• Financial system has very little borrowings
• Loans to deposits ratio 0.66 (Spain 1.40)
• In the last Chinese banking crisis (2000), this
  figure was 0.90
• Reasonable interest rates Mortgages (6), and
  account for a mere 13 of loans. Borrowing from
  banks to buy land is not allowed.
• Increase in property prices similar to that of
  available income 10 a year.
• Little government debt including local bodies,
  this is 75 of GDP. The value of state
  enterprises is estimated at over 100 of GDP.

CEO of Coca-Cola It is easier to do business in
China than in the USA (FT 26/09/2011)
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EUROPE VS. USA
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PORTFOLIOS MAIN FEATURES
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TWO EXAMPLES OF INVESTMENT
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BMW PREFERRED SHARES

2013 We use a normalized operating profit of 8.2. Company guidance is 8-10. Operating profit in 2012 is expected to be 14.  
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BMW PREFERRED SHARES
Luxury Stocks Price/Free cash flow 2012 2013
  Burberry 22,8 x 19,9 x
  Coach 21,3 x 19,1 x
  Richemont 23,6 x 18,9 x
  Hermes 63,1 x 42,8 x
  Luxottica 23,4 x 20,8 x
  LVMH 22,1 x 18,0 x
  PPR 14,7 x 10,9 x
  Prada 30,1 x 21,3 x
  Ferragamo 22,4 x 22,1 x
  Tiffany 38,7 x 22,2 x
  Tod's 22,5 x 18,1 x
  Average 27,7 x 21,3 x
  Source Factset
Why Preferreds Drawbacks ? Liquidity 75.000 shares/day. ? No voting rights. Slightly higher dividend by company statutes. Employees incentive plans are done through preferreds. Average discount of 5 largest german stocks with dual shares 4.  
FORD Market cap, bn Market cap, bn 33,5
Adj Net Cash 1,7
EV 2013e 31,7

2011 2012 2013
Free cash flow Free cash flow 4,1 4,3 4,9
Price / Free cash flow Price / Free cash flow 8,1x 8,2x 6,5x
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EXOR
Holding controlled by the Agnelli family, founders of Fiat Holding controlled by the Agnelli family, founders of Fiat Holding controlled by the Agnelli family, founders of Fiat
mn mn Main investments Value at market price Bestinver Value

Fiat Industrial Fiat Industrial Case New Holland (agricultural and construction equipment), Iveco (trucks and commercial vehicles), FPT Industrial (engines and transmission systems). 2.948 4.622
Case New Holland (agricultural and construction equipment), Iveco (trucks and commercial vehicles), FPT Industrial (engines and transmission systems).

Fiat Auto Fiat Auto Cars (Fiat, Chrysler, Alfa Romeo, Lancia, Ferrari, Maserati), Fiat brand commercial vehicles and components. 1.593 3.259
Cars (Fiat, Chrysler, Alfa Romeo, Lancia, Ferrari, Maserati), Fiat brand commercial vehicles and components.

SGS SGS Global leader in verification, inspection, control and certification activities 1.662 1.696

Cushman Wakefield Cushman Wakefield Largest privately held company for real estate services 417 417

Alpitour Alpitour Largest integrated Italian tourism group 240 240

Sequana Sequana Leading European group in the distribution of paper and packaging products 59 59

Net debt and others Net debt and others Juventus, Banca Leonardo, etc. 201 201
Total value Total value 7.119 10.494
Value per share Value per share 31,3 46,2

Exor preferred share price (Milan Stock Exchange) Exor preferred share price (Milan Stock Exchange) Exor preferred share price (Milan Stock Exchange) 15,5 15,5
Upside 102 198
Book Value
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APPENDIX
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THE AUSTRIAN SCHOOL
Essential differences between the Austrian and
neoclassical schools
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THE AUSTRIAN SCHOOL
(continued)
Source The Austrian School, Jesús Huerta de
Soto Other sources Mises Institute
(www.mises.org)
Source Bestinver
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C/ Juan de Mena, 8 - 28014 Madrid (Spain) ?
34.91.595.91.00 bestinver_at_bestinver.es
www.bestinver.com
BESTINVER
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• This document has been prepared by Bestinver
  Gestión, S.A. SGIIC for informational purposes
  only and can be in no way considered an offer to
  participate in its investment funds. The
  information contained herein was compiled by
  Bestinver Gestión, S.A. SGIIC from sources it
  believes are reliable. However, while appropriate
  measures have been taken to verify its accuracy,
  Bestinver Gestión, S.A. SGIIC in no way
  guarantees that it is accurate, complete or up to
  date.
• All opinions and estimates included in this
  document reflect the best judgment of Bestinver
  Gestión, S.A. SGIIC as of the date they refer to
  and may be changed without prior notification.
  All opinions issued herein are general in nature
  and do not take into consideration individual
  specific investment objectives or financial
  circumstances.
• Under no circumstances can Bestinver Gestión,
  S.A. SGIIC, its managers, employees or authorized
  personnel be held responsible for any damage
  resulting, directly or indirectly, from the use
  of the information contained within this
  document. Information regarding past returns does
  not in any way constitute a promise or guarantee
  as to future performance.
• All Bestinver returns are expressed as net, after
  expenses and commissions. They are denominated in
  euros.
• Share redemptions and transfers of securities
  held for less than one year are penalised with a
  commission
• Source of Bestinver return and fees data
  BESTINVER
• Source of sector return and fees data INVERCO
• Source of national and international rankings
  BESTINVER. Bestinver funds, third-party mutual
  funds and equity index returns (Madrid SE, IBEX,
  SP 500 and MSCI) are calculated based on the
  closing level on the date appearing at the bottom
  of this page.
• Source of fund P/Es BESTINVER
• Source of market P/Es and Argentina Charts
  Bloomberg
• Source of Value Investors The Superinvestors
  of Graham-and-Doddsville
• Sources of Performance of diferent assets since
  1800 Jeremy Siegel "Stocks for the long run"
  Irwin Professional

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May 3 - 4, 2012 Mammel Hall Omaha, Nebraska