OVERWEIGHT ALLOCATION TO GROWTH STOCKS

Our mandates outperformed the market in June. We made two new purchases—Volkswagen and Sky Deutschland (see stock highlights below). More than two-thirds of the portfolio is invested in growth stocks, such as optics manufacturer Essilor and Italian media group Mediaset. The remainder comprises value investments, such as Atlantia and Eurotunnel. We have minimal exposure to the financial sector, where the outlook remains uncertain.

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STRONG GROWTH DRIVES CORPORATE PROFITS

Our mandates performed in line with the market in May. Over two-thirds of the portfolio is invested in growth stocks. Our investments range from Essilor, which manufactures optics, to Mediaset, the Italian media group. The remainder is made up of value investments such as France Telecom and Eurotunnel. We have only a minimal exposure to the financial sector where the outlook remains uncertain.

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CORE EUROPE KEY TO ECONOMIC GROWTH

Our Mandates underperformed the market marginally in April. We top-sliced our position in Edenred, which operates pre-paid corporate voucher schemes, after a period of exceptional performance – its share price had also increased recently on the back of takeover speculation. We made a new investment in Essilor (see stock highlights).

CORE EUROPE POISED FOR STRONG GROWTH

Our mandates outperformed the market in February. We sold our investments in BiC and Victrex following a period of exceptional outperformance. At the same time, we added to our positions in Rexel, St James’s Place and Mediaset (see stock highlights).

EUROPEAN BUSINESSES APPEAR VIBRANT

Our mandates outperformed the market in December owing to healthy returns from Software AG, Pandora and Rexel. We made relatively few changes over the month but sold our investment in Sage following a period of strong performance.

S.W. MITCHELL CAPITAL’S THOUGHTS ON INFLATION

Inflation rates are at record lows. Government bond yields bump along at rock bottom levels. One might be forgiven for thinking that inflation was dead. Fears of outright deflation – the ‘lost decade’ prognosis – may have faded in most economies outside the USA (where consumer price pressure remains close to non-existent), but there are few expectations anywhere else of a durable re-emergence of inflation. This may well be wrong.

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OVERWEIGHT QUALITY GROWTH COMPANIES

Our mandates outperformed in October with performance driven by Air France (up 17%), Pandora (up 16%), Eurotunnel (up 14%) and Software AG (up 13%). We purchased new positions in Pandora and Sonova (see stock highlights). We sold our holdings in Swedbank and KBC following a period of strong outperformance and reduced our holding in Banco Popolare, which has found it difficult to sell assets in order to strengthen its capital position. We have raised the quality of the portfolio over the past year. Quality growth and growth-cyclicals now make up almost 65% of the portfolio. Classic cyclicals and financials comprise a further 30%, with “value” stocks making up the remainder.

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