Suits investors looking for long-term capital growth from the Continental European region. Its small-to-medium company bias means that it suits more experienced investors who are looking to add a more dynamic risk/reward exposure.

The Trust finds exciting growth opportunities within small and medium sized companies and many of these companies trade internationally. In addition it has some exposure to emerging Europe.

• The Trust invests in smaller, less well known European companies from very well known Western European countries.
• The stock-picking skills of the manager are ideally suited to seeking growth opportunities which exist even in an uncertain environment.
• The Trust targets companies with a strong competitive position in niche markets.

• Investors need to be aware of exchange rates. Most of the investments in this portfolio are not made in Sterling, so exchange rates could affect the value of and income from your investment.
• Most of the investments in this portfolio are in smaller companies shares. They may be more difficult to buy and sell and their share price may fluctuate more than that of larger companies. Full details of risks.

Risk sentiment continued to improve in January with most sovereign yields declining and equity markets posting positive returns. The uptake of the European Central Bank’s Long-Term Refinancing Operation (LTRO) scheme reassured markets that we would not see a European bank fail as a result of a liquidity squeeze. The recognition from some politicians that austerity must be combined with growth also served to improve the mood. Small companies unsurprisingly outperformed their larger counterparts.

The portfolio benefited from the improved mood. It was pleasing to see long-standing holdings in Sky Deutschland and Northland Resources rebound after a difficult period. The reshaping of the portfolio is also bearing fruit with Ferragamo, Aareal Bank, Inficon and De’Longhi all doing well. We have added the French real estate developer, Nexity, as it seems likely that they will benefit from pre-election initiatives by the incumbent government. We sold Wavin as we see little upside in waiting for the final cash transfer following the bid for the company. Other activity involved top slicing the better performers towards the end of the month.

We are encouraged that policy response is gradually moving in the right direction (towards growth). That said, after a strong start to the year we would expect a period of consolidation. Attractive valuations and the general underweight to Europe means we remain upbeat about making gains in 2012. 

Ollie Beckett
January 2012