US AND EMERGING REGIONS KEY TO GROWTH

Our mandates outperformed the market in March. We made two key trades over the month – we sold our investment in Air Liquide following a period of strong outperformance and reinvested in Zodiac Aerospace (see stock highlight). The core strategy remains focused on high-quality growth companies across a broad range of sectors including technology (Software AG, Dassault Systemes and Amadeus), consumer (LVMH, Swatch and Hennes & Mauritz) and industrials (Essilor, Legrand and VW) as well as some cyclical sectors (Accor and BNP Paribas).

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EUROPE’S CORPORATE SECTOR LOOKS STRONG

Our mandates outperformed the market in February. We added to our investment in BNP Paribas and purchased a new holding in Wolseley (see stock highlight). We sold our position in Atlantia following a period of reasonable share price performance and took part in Sky Deutschland’s recent capital raising to further increase our weighting. The core portfolio remains focused on high-quality growth companies from a broad range of sectors including technology, consumer and industrials. For the first time in more than a year, we have also been able to uncover a number of great opportunities in the more cyclical areas of the market, such as Accor and BNP Paribas.

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OPPORTUNITIES IN CYCLICAL BUSINESSES

Our mandates outperformed the market in January. The strategy remains focused on high-quality growth businesses from a broad range of sectors. We have significant exposure to the technology sector and own a number of consumer facing companies and industrials. For the first time in more than a year we have been able to uncover opportunities in the more cyclical areas of the market and added new positions in Accor and BNP Paribas in January.

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A SOLUTION TO THE EURO CRISIS IS EMERGING

Our mandates performed in line with the market in December and we made no significant investments over the month. We are continuing to focus our investment efforts on high-quality growth companies that we believe are best able to develop their businesses despite operating within a sluggish economic environment. Our core positions include leading industrial companies such as Legrand, Assa Abloy, Essilor, Neopost and Air Liquide. We also hold a number of consumer groups such as LVMH, Swatch, H&M and SEB. We are also invested in the utilities Eurotunnel and Atlantia. We have very limited exposure to financial companies – the outlook for this sector is especially opaque and share prices continue to be extremely volatile.

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CONFIDENCE RETURNS TO FINANCIAL MARKETS

Our mandates underperformed the market in November. We top-sliced our positions in Legrand and Rexel in order to invest in Edenred, the world leader in pre-paid services. Revenue growth remains buoyant at Edenred (up 9%) driven by rapid sales growth from its emerging market businesses (over 60% sales) and new ticketing services. The business is also highly cash generative—the shares boast a free cash flow of 10% and a dividend yield of 5%.

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OPTIMISTIC DESPITE SLOWING ECONOMY

We remain optimistic on the outlook for European equities even though a number of indicators suggest global economic activity could be slowing. This trend would make the process of European sovereign debt deleveraging more challenging. At the same time, sentiment has been further undermined by the difficulty in achieving consensus among European policymakers over how to manage the debt crisis in Europe’s peripheral countries.

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BUSINESS AS USUAL FOR EUROPEAN FIRMS

Stockpickers have faced highly conflicting signals over the past few weeks. On the negative side, a number of indicators suggest global economic activity could be slowing. This trend would make the process of European sovereign debt deleveraging more challenging. At the same time, sentiment has been further undermined by the difficulty in achieving consensus among European policymakers over how to manage the debt crisis in Europe’s periphery.

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OUTPERFORMANCE THROUGH GROWTH BIAS

Our mandates outperformed the market in August. More than two-thirds of the portfolio is invested in growth stocks such as Neopost, which manufactures franking machines, and Software AG, which helps other businesses become more efficient. The remainder comprises value investments such as Italian motorway tolls operator Atlantia and Channel Tunnel operator Eurotunnel. We have minimal exposure to the financial sector where the outlook remains uncertain.

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EUROPE’S CORPORATE SECTOR LOOKS STRONG

Our mandates outperformed the market in July. We added three new holdings—SEB, Hennes and Mauritz (H&M) and Croda (see stock highlights)—and increased our positions in Sky Deutschland and Essilor. We sold our investments in Homeserve, UBS and France Telecom. Over two-thirds of the portfolio comprises growth stocks with the remainder in value investments. We have minimal exposure to the financial sector where the outlook remains uncertain.

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EUROHEDGE PROFILE ON STUART MITCHELL

Ex-JO Hambro man Stuart Mitchell and his team have been investing in European equities for more than two decades. Expansion into UCITS and the hiring of a shortside analyst are the latest moves to grow the business, with emerging market and UK funds next on the list.