Source - PRN
All information is at 31 AUGUST 2016 and unaudited.
Performance at month end with net income reinvested
One Three One Three Launch
Month Months Year Years (20 Sep 04)
Net asset value* (undiluted) 1.1% 9.4% 16.4% 31.0% 257.8%
Net asset value* (diluted) 1.1% 9.4% 16.7% 31.2% 258.2%
Share price 1.7% 10.3% 13.8% 27.5% 241.2%
FTSE World Europe ex UK 1.7% 11.3% 15.4% 29.1% 175.2%
Sources: BlackRock and Datastream
At month end
Net asset value (capital only): 283.30p
Net asset value (including income): 287.43p
Net asset value (capital only)*: 283.30p
Net asset value (including income)*: 287.43p
Share price: 272.00p
Discount to NAV (including income): 5.4%
Discount to NAV (including income)*: 5.4%
Net gearing: 0.2%
Net yield**: 1.8%
Total assets (including income): £294.9m
Ordinary shares in issue***: 102,603,113
Ongoing charges****: 0.89%
* Diluted for treasury shares.
** Based on a final dividend of 3.35p for the year ended 31 August 2015 and an interim dividend of 1.65p per share for the year ending 31 August 2016.
*** Excluding 7,725,825 shares held in treasury.
**** Calculated as a percentage of average net assets and using expenses, excluding performance fees and interest costs, after relief for taxation for the year ended 31 August 2015.
Sector Analysis Total Assets  Country Analysis Total Assets 
(%)  (%) 
Industrials 26.8  France 19.9 
Financials 18.5  Netherlands 11.9 
Consumer Goods 18.4  Germany 11.8 
Consumer Services 11.1  Switzerland 10.4 
Technology 8.7  Denmark 7.6 
Health Care 8.5  Ireland 7.0 
Basic Materials 5.6  Belgium 6.0 
Telecommunications 2.6  Sweden 5.4 
Net current liabilities (0.2)  Finland 4.9 
-----  Russia 3.4 
100.0  Luxembourg 2.9 
=====  Italy 2.7 
Turkey 2.1 
Spain 1.5 
Ukraine 1.4 
Poland 1.3 
Net current liabilities (0.2) 
Ten Largest Equity Investments
% of
Company Country Total Assets
Koninklijke Netherlands 4.9
Zurich Insurance Group Switzerland 3.4
Vinci France 2.9
Tenaris Luxembourg 2.9
RELX Netherlands 2.9
Adidas Germany 2.9
Unibail-Rodamco France 2.8
Anheuser-Busch Inbev Belgium 2.8
Bayer Germany 2.7
CRH Ireland 2.5

Commenting on the markets, Vincent Devlin, representing the Investment Manager noted:
During the month, the Company’s NAV increased by 1.1% and the share price rose by 1.7%. For reference, the FTSE World Europe ex UK Index was up 1.7% during the period.
During August, European markets ground higher. As risk premia compressed, market leadership came from financials (especially banks), with other more cyclical sectors (industrials and materials) also performing strongly. Defensive sectors such as health care and utilities lagged. European macro releases were mixed but overall positive during August, with the Eurozone Manufacturing Purchasing Managers Index and Eurozone Industrial Production beating market expectations. The French business sentiment conditions surveys also indicated a more optimistic tone, although the German IFO Business Climate Index was less positive. The Bank of England cut interest rates and announced an expansion of its quantitative easing programme.
The Company’s NAV rose at a lesser rate than the market through August as stock selection, when compared with the reference index, proved negative. The allocation of capital by sector, however, was a positive contributor to performance. In particular, the lower allocation of capital to health care, and higher allocation to industrials proved positive for performance. Given the strong share price performance of banking stocks towards the end of the month, the underweight allocation to financials detracted from returns.
The largest detractor to performance was Danish health care company Novo Nordisk. The stock sold off sharply after announcing a small downgrade to guidance. This disappointed the market as it was the first downgrade since 2003 and came as a result of a more competitive environment in the US. Despite the company's attractive pipeline, earnings in the short to medium term look uncertain at present given competition and pricing pressures and thus we exited the position.
A position in Russian IT company Mail.Ru detracted from returns as results for the first half of 2016 proved weak at the revenue level as consumer spending in Russia fell. A position in Swedish lock manufacturer Assa Abloy also proved negative for performance over the month as the share price fell as expectations for weakness in China weighed on the company’s organic growth potential.
On a positive note, performance was more robust within exposures towards construction and materials, with CRH, Kingspan and Geberit providing positive returns. The expectation for further fiscal stimulus in developed markets has been encouraging for the construction industry. Those companies with exposure to the US, such as CRH, are already enjoying accelerated growth; in August the company reported 20% year-on-year growth in topline earnings.
DSV also contributed positively to performance, beating earnings expectations by 1% in the second quarter. The company raised guidance for their full year results, driven by synergies from the UTI deal, which are coming through at a faster rate than previously expected.
At the end of the period, the portfolio had higher weightings when compared with the reference index to industrials, technology and consumer services. The portfolio had a lower weighting towards consumer goods, oil & gas, utilities, basic materials, financials, health care and telecoms.
Low volatility and low trading volume characterised markets over the summer and mixed economic data underscored the uncertain global growth outlook. Given market expectations for earnings per share (EPS) growth were very low heading into the reporting season, it was no surprise to see the second quarter earnings season coming in better than expected. However, this has failed to materialise in any subsequent significant upgrades and the consensus for earnings growth in 2016 remains depressed. However, compared to low bond yields, the dividend yield of the European equity market looks particularly attractive for income investors. While we think the European Central Bank and Bank of England have significantly underestimated the impact of ultra-low rates on banks, we do not see them reversing their stance and believe monetary policy is likely to be supportive in Europe for an extended period given that Eurozone inflation remains stubbornly low. In this context, we remain cautious on the financials sector overall. We continue to see good opportunities within the market however; notable attractions are in stocks with highly cash generative characteristics and companies with greater earnings visibility, as well as in a number of companies benefiting from capital expenditure within the infrastructure/construction space where we expect trends to either remain supportive or accelerate further. We believe these stocks should outperform in the mid-term, as their attractive earnings growth profile and cash flow generation come through.
14 September 2016
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