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General Meeting 8

November 6, 2012

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Meeting Agenda

Market Update

Elections and the Markets

Fossil Pitch

Announcements

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Market Overview

Carl Icahn Takes a 10% stake in

netflix

Netflix board creates a Poison

Pill Strategy

Netflix

Ipad Mini Goes on Sale

Management changes

Scott Forstall Senior VP of IOS

Development leaving

No Replacement

Apple

Markets Closed Monday and

Tuesday

Resumed on Halloween

Gas Demand expected to go

down because of Sandy

Hurricane Sandy

Manufacture indexes tick up to

51.7

Consumer confidence rise to a 4

year high at 72.2

Private Sectore jobs for October

at 158K and Unemployment at

7.8%

Jobs Report

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Elections and the Market

1. Declines in dividend payers:

Utilities

REITs

Telecom

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Elections and the Market

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Elections and the Market

2. Bond indexes are up in US and Germany

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Elections and the Market

3. Banks are underperforming

4. Fiscal Cliff Uncertainty

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Fossil (FOSL)

Pearl Agarwal . Sudhish Srikanth . Angela Morisette . Andrew Huang

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Macro Economic Outlook

Increase in domestic consumptionand consumer spending

China GDP slowdown has almostbottomed out

Increase in overall sales during theupcoming holiday season

Rise of middle class in EmergingMarkets such as Turkey, India,South-East Asia

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Industry Primer

Retail Industry expected to maintain constant growthuntil 2014

Sales growth will increase by 12.1% this holiday seasonfrom 2011

Consumer spending more on high-end/luxury brands anddiscount retailers

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Fossil (FOSL)

Company

InternationalRecent News

Multiples

April 2: Acquired Skagen

October 15:Applies to enterinto India

November 6: Q3 earningsmissed guidance, shares plunged11%

Global designer, marketer anddistributer that specializes inconsumer fashion accessories

Distributes throughwholesalers, retail stores andcommercial websites

127 retail stores and 74 outletstores

Presence in all departmentstores

Present in over 90 countries;

Asia Pacific region, Europe,South and Central America,the Caribbean, Canada,Mexico and the Middle East.

In 2001, Fossil completed theacquisition of three separatecompanies located in Bienne,Switzerland enabled it toleverage Swiss manufacturing.

Market Cap: 5.06BCurrent Price: $83.3652 week : 62.77 - 139.20P/E :17.29EPS :4.81

Beta :1.85Operating margin:13.85%Return on Equity: 20.4%

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Price Chart

Acquired Skagen

Q1 Earnings Call(40% decline)

Q2EarningsCall

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Strong Top-Line Growth

Strong Product Line

Global Exposure

Tie-ups with High-End Brands

Investment Thesis

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Strong Top-Line Growth

$1,548

$2,031

$2,567

138.1139.2

255.2

0

50

100

150

200

250

300

0

500

1,000

1,500

2,000

2,500

3,000

2009 2010 2011

Historical Revenue & Net Income(in millions)

Increasing Sales

Strong upside potential

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Strong Product Line

71.8%

26.0%

0.6% 0.3%

Product Diversification

Watches Fashion Accessories Clothing Shoes

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Tie-ups with High-End Brands

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Global Exposure

Increasing Exposureto Emerging Markets

like China and India

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Company Comparables

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Discounted Cash Flow2012 2013 2014 2015 2016 2017

Revenue $2,699.3 $2,834.3 $3,117.7 $3,335.9 $3,502.7 $3,642.8

Cost of Sales $1,188.6 $1,307.5 $1,503.6 $1,729.1 $1,867.4 $1,998.2

Gross Profit $1,510.7 $1,526.8 $1,614.1 $1,606.8 $1,635.3 $1,644.7

Gross Margin 56.0% 53.9% 51.8% 48.2% 46.7% 45.1%

SG&A Expenses $1,045.4 $1,149.94 $1,241.94 $1,341.29 $1,435.18 $1,535.64

Other Income $0.0 $0.0 $0.0 $0.0 $0.0 $0.0

EBIT $465.3 $376.9 $372.2 $265.5 $200.1 $109.0

EBIT Margin 17.2% 13.3% 11.9% 8.0% 5.7% 3.0%

NOPAT $316.9 $256.6 $253.5 $180.8 $136.3 $74.2

D&A $236.2 $236.2 $236.2 $236.2 $236.2 $236.2CapEx $109.6 $111.8 $118.5 $122.1 $124.5 $127.0

Change in NWC $66.4 ($568.2) $0.0 $0.0 $0.0 $0.0

FCF $377.1 $949.3 $371.2 $295.0 $248.0 $183.5

Present Value of Cash Flows $863.0 $306.7 $221.6 $169.4 $113.9

Terminal Value 9,173.07$

Enterprise Value 7,370.35$

WACC 10%Tax Rate 31.9%

Exit Multiple 50.00x

Share Price 83.36$

Enterprise Value 7,370.3$

Less Net Debt -$

Equity Value 7,370.3$

Shares Outstanding 60.8

Value Per Share 121.22$

Implied Discount 45.42%

Assumptions

Calculations

Implied Share Price: $121.22

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Risks & Mitigants

Counterfeit Products

Mitigated by price positioning and loyal consumer base

Volatile Revenue

Mitigated by buy-in strategy and regular cycles in fashion

Discretionary Spending Lowered with Bad Economy Fossils practical designs

The global economy is currently in a recession, therefore, it is theperfect time to purchase consumer discretionary investments

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Competitors

Fossil style more classic, whichconsumers will tend to lean

towards Fossil has multiple partnershipswith DKNY, Armani, Diesel, andBurberry, whereas Swatch doesnthave these partnerships

Weak licensing agreementswith companies Domestic company with97% sales coming in U.S. Fossil has betterinternational growth

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Recommendation

Entry: Buy 10 shares at $ 83.36

Stop Loss: $80

Exit Strategy: $ 100.00

Holding Period: 4 months; RevaluateExpected Return: 20%

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Pitch Schedule

Date Name

11-Sep SCG Directors

18-Sep John C

25-Sep Olympics

2-Oct John T

9-Oct John C16-Oct Billy

23-Oct Stephen

30-Oct Ryan

6-Nov Angela

13-Nov Finance Panel

20-Nov Thanksgiving27-Nov Ali

4-Dec John T

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Announcements

Finance Internship Panel next week!

Good luck to case teams!

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