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STANLIB European Equity Fund STANLIB Offshore Ltd STANLIB European Equity Fund News Stanlib European Equity comment - Sep 19 Monday, 9 December 2019 Fund Manager Comment Market Background During the third quarter, the MSCI Europe index rose by 2.6% in euro terms. Defensive and cyclical stocks gyrated in and out of favour as risk appetite ebbed and flowed. Belgium and the Netherlands delivered the best returns, while Sweden and Germany lagged. Utilities and real estate were the top performing sectors; energy and materials were the weakest. Signs of a global economic slowdown multiplied. In the US, second-quarter GDP data showed that a fall in business investment was steeper than prior estimates. UK statistics indicated that the economy was faltering amid Brexit-related uncertainty; GDP dipped by 0.2% in the second quarter. The German economy also shrank, and business confidence slumped. In September, the European Central Bank announced stimulus measures to spur growth. These included lowering interest rates further into negative territory, restarting its bond-purchase programme, and outlining more generous terms for long-term cheap financing for banks. The ECB President also emphasised the need for fiscal stimulus. In the US, the Federal Reserve cut rates for a second time this year. Performance The portfolio lagged its benchmark index on a gross basis over the quarter. The underweighting in Sweden added value, though the underweight exposure to Switzerland, the initial underweighting in healthcare and the zero weighting in utilities all detracted. Stock selection was successful in technology, materials, consumer discretionary and communication services, but less so elsewhere. Positive relative contributors included ASML and PUMA. ASML (semiconductor equipment) published robust quarterly results, which demonstrated strong revenue growth and healthy gross margins. Strength in EUV manufacturing, field upgrade sales and the logic market more than offset softer demand for memory products. PUMA reported growth in all geographic regions and product segments. The sportswear business also raised its full-year financial guidance. Detractors included Prudential and Sampo as the financial sector reacted to weaker economic indicators. Outlook Loose monetary policy aims to stimulate economic growth and, if effective, this should boost flagging corporate profitability. The evidence of a weaker economy in Europe comes mainly from the manufacturing sector; the consumer sector remains reasonably buoyant. The outcome of Brexit remains unclear, although political developments in Italy have reached some stability, and the new government is likely to reduce tensions with Brussels over the budget and other issues. Tensions with Iran and over global trade are unhelpful but any positive resolution is likely to boost market sentiment. While global growth has been downgraded, fiscal stimulus in China is expected to help, and the US is likely to ensure recession is avoided in the run up to the 2020 elections. The focus of the portfolio is on stock selection, informed by macroeconomic and thematic views. The fund favours companies that have a competitive advantage and pricing power generated by brands, patented processes, regulatory barriers to entry and strong market positions.   STANLIB European Equity comment - Mar 19 Wednesday, 12 June 2019 Fund Manager Comment Market Background - Markets started the year on a buoyant note. The portfolio’s benchmark index rose by 13.0% in euro terms during the first quarter of 2019. Belgium, Italy and the Netherlands led the outperformers. In sector terms, consumer staples, technology and materials delivered the best returns. Communication services and financials were weaker. - News that the US and China were to hold further talks reignited hopes that President Trump may soften his stance on trade tariffs. Markets were also cheered when the US Federal Reserve adopted a more dovish tone, indicating that it was alert to the downside economic risks of further rapid interest-rate increases. The European Central Bank kept interest rates unchanged at record lows, and signalled that a rise is unlikely this year. The Bank of England also kept interest rates on hold. - The Eurozone’s composite PMI remained in modestly expansionary territory, fuelled by momentum in service sectors, but the latest manufacturing reading indicated weakness, notably in Germany and France. - T he Brexit process is still unfolding, and the original departure date of 29 March has now passed. The UK parliament has again rejected the withdrawal plan negotiated with the EU and the prime minister’s position is increasingly beleaguered. It remains uncertain whether an acceptable alternative will emerge or whether the outcome will be a ‘no-deal’ Brexit. GDP figures revealed a contraction in December 2018 as economic uncertainty took its toll. The UK’s composite PMI fell to 50 in March 2019 (a reading above 50 signifies expansion). Activity - New positions included Total, St James’s Place, Legal & General, Partners Group, Persimmon and Teleperformance. - Sales included John Wood Group, British American Tobacco and ITV. Outlook - European equities are supported by encouraging profitability, by economic growth, which is slowing but still positive, and by attractive valuations relative to US equities. The market volatility seen in recent months presents us with investment opportunities. - It will take time before the full effects of Brexit become clear; the same is true of Italian politics where there have been well-publicised tensions with Brussels over the budget. Other risks include heightened tensions with Russia, the threat of a global trade war, and slower global growth as the Chinese economy decelerates and the US nears the end of the economic cycle. - Our main focus in managing the portfolio is on stock selection, informed by macro- economic and thematic views. We favour companies that have a competitive advantage and pricing power generated by brands, patented processes, regulatory barriers to entry and strong market positions.   Stanlib European Equity comment - Mar 16 Friday, 17 June 2016 Fund Manager Comment Fund Review After returning +4.9% in euros in the 4th quarter of 2015, the fund encountered very difficult markets in the first quarter of 2016, returning -8.4% in euros (benchmark -6.9%). In the year to end March the return was -12.3% (benchmark -14.7%). While underweights in Italy and Switzerland proved beneficial relative to the benchmark, being underweight the oil sector hurt relative performance as oil and mining shares bounced back. On the whole in the quarter, share selection was unfavourable. The UK remains the top country allocation in the fund at 32% of portfolio (up from 28% at end December), now above the benchmark’s 29.7%. Germany has overtaken France as the second biggest at 13.2% (versus 14.2% for the benchmark), followed by France at 13.1%, underweight the 15.4% of the benchmark, then Switzerland at 8.4% (14.1% for benchmark), down from 12.8% at end December. Similar to end September and December, the surprise is 5.8% in Ireland (0.8% for the benchmark). The UK’s return in the quarter was -6.5%, Germany’s was -9.9%, France -6.6%, Switzerland -13.4% and Ireland -5% (one of the best returns again). The only positive country return was from Sweden with +2.4% (just 2.2% of portfolio). Financials are still the biggest sector at 17.7% (benchmark 20.4%), but down substantially from 24.6% at end December, then Consumer Staples at 16.8% (benchmark 15.7%), up strongly from 11.9% in December, followed by Industrials at 13.6% (benchmark 11.9%), then Health Care at 12.8% (benchmark 13.3%), down sharply from 16.9% at end December. Financials had the worst performance of -15.1% as banks got hit because of the negative interest rates. Health care performance was next worst with -10.5%. Energy was best with +2.2%, while Materials did -3.2%. The fund is still very underweight in oil shares at 3.5% versus 6.4% for the benchmark, but is overweight in materials/mining at 7.6% of portfolio versus 7% for the benchmark. Information technology is 6%, still overweight though (4.3% for benchmark). Looking Ahead European shares have lagged the US in their recovery from the big correction (-31% from the peak last year). Quantitative easing, lower energy prices, euro weakness and loosening credit conditions are all enhancing the trading environment for European companies and the fund manager is finding attractive investment opportunities. Political uncertainty remains a significant issue. Spain and Ireland have yet to form governments following inconclusive election results, while in the UK, potential interest rate increases and the forthcoming EU-membership referendum are hurting the market and the currency. Geopolitical tensions may create volatility in equity markets too.   Stanlib European Equity comment - Jun 14 Thursday, 11 September 2014 Fund Manager Comment Fund Review Your fund returned 4% in the first six months of 2014, underperforming the MSCI Europe Index's 5.9%, after a 1.9% return in quarter two to end June. Fidelity has managed the fund, an institutional Fidelity fund, since inception. However, later this year the fund is expected to be switched over to Thread needle Investments, which is our equity and balanced fund manager of choice offshore. They have outperformed Fidelity in Europe and will charge lower management fees than Fidelity. The UK is still the top country allocation in the fund, at 30.7% (30.1% in March). France remains at number two with 17.2%, then Germany at 15% and Switzerland at 11.6%, followed by the Netherlands at 5.9%. Financials are still the biggest sector at 20.8% (benchmark 22.3%), followed by Health Care at 15.4% (benchmark 12.7%), then Consumer Discretionary at 13% (benchmark 10.1%) and Consumer Staples at 10.8% (benchmark 13.5%). Sanofi remains the top share at 3% of fund. British American Tobacco has replaced UBS in the top 10. Looking Ahead The MSCI Europe Index was outperforming the MSCI US Index until early May. Since then the US has gained quite strongly to the point where the US is now ahead so far in 2014 by 1.4% in dollars. Over the past year to end June, however, Europe outperformed by 4%. Over the last six years, though, the US beat Europe by 30%! Europe seems to be in the process of turning that around, but it is not conclusive as yet. When will stock markets correct? That is the question everyone is asking. Markets seldom correct when most are expecting it. The bull market remains intact.   Stanlib European Equity comment - Mar 14 Friday, 6 June 2014 Fund Manager Comment Market Environment The fund had a reasonably good quarter to end March, especially after returning 9.7% in dollars in the previous quarter to end December. Fund returns were mildly positive in dollars +0.3%. For the year to end March, the fund returned a stellar 24% in dollars, clearly outperforming the 31.4% return of the STANLIB Global Equity Feeder Fund. Fidelity continues to manage the fund, an institutional Pan European fund. The fund's top country allocation is still the UK at 30.1% of fund (up from 28.9% three months ago). Next comes France at 17.1% (above the benchmark's 15.2%), while Germany has slipped to third position with 16.4%, still ahead of the benchmark's 14.1%. Switzerland at 11.6% and the Netherlands at 6% are next. The fund has reduced its exposure to the Eurozone from 50% of fund to 46.8% of fund, slightly above the 46.2% of the benchmark. Shares held in non-Eurozone Europe now comprise 18.2% of fund. The fund is quite overweight in the smaller share sector (up to five billion pounds market capitalisation), at 26.1% of portfolio, versus just 6.4% for the benchmark. Shares with a market capitalisation or value greater than ten billion pounds comprise 61.2% of fund, well below the 80.9% of the benchmark. Financials continue to be the biggest sector in the fund at 20.7%, slightly higher than three months ago, followed by Healthcare (15.2%) and Consumer Discretionary (14.1%), both overweight relative to benchmark. The top ten shares include Sanofi (health care and new in the top ten), Nestle, Royal Dutch Shell, Bayer and HSBC, as well as UBS, Barclays and Volkswagen. Looking Ahead Despite gaining 57% in dollars in the twenty two months since June 2012, when European central bank governor Mario Draghi made his now famous "we will do whatever it takes to save the euro" comment, European shares generally seem to offer decent value. In most countries the dividend yields are much higher than the government ten year bond yields, which is unusual. Growth in dividends in 2014 is estimated to be around 10% too. European shares have been outperforming American shares since last July. At this stage, we don't foresee a change in this. It is possible that the May to September period may present some challenges, as has frequently occurred in the past, but that is hard to predict.   Stanlib European Equity comment - Sep 13 Thursday, 2 January 2014 Fund Manager Comment Market Environment European equities rebounded strongly over the quarter, buoyed by encouraging economic data from Europe and China, indicating that the global economic recovery is on track. In a surprise move, the Federal Reserve decided against immediately tapering its asset purchase programme, which also boosted sentiment. Markets were further supported by news of an alternative solution emerging to the Syrian crisis that could avert a possible Western military strike. However, there was intermittent volatility due to the possibility of a shutdown of US government institutions. Political uncertainty in Italy and Portugal also weighed on sentiment. At a sector level, telecommunications and consumer discretionary were among the leading gainers as investors preferred attractively valued stocks and cyclical equities. Meanwhile, the health care and consumer staples sectors lagged the broader market. The eurozone's economy expanded after 18 months of contraction, with the GDP increasing by 0.3% in the second quarter. UK's economy also grew by 0.7%. Meanwhile, the region's inflation rate fell to 1.1% in September. However, inflation remained stubbornly high in the UK, with the annual rate of Consumer Price Index clocking 2.7% in August, well above the government's 2.0% target. Both the Bank of England and the European Central Bank kept their main interest rate unchanged at 0.5%. Fund Performance The fund underperformed the index over the quarter. Whilst positions in the energy sector detracted from performance, consumer discretionary holdings benefited from encouraging earnings releases. Selected energy positions hurt returns Shares in Swiss offshore drilling services provider Transocean fell after it reported second quarter results that were in line with expectations; analysts expected it to beat consensus estimates. Royal Dutch Shell retreated after its second quarter earnings slipped due to oil theft and gas supply disruptions in Nigeria. However, the stock provides a solid defensive investment opportunity and has a strong balance sheet. Sector positioning in consumer staples held back performance The holding in Danone slid as management issued a cautious outlook for third quarter sales of its baby nutrition products. This stemmed from the recall of milk formula products because of a contamination scare that turned out to be a false alarm Consumer discretionary stocks added value Professional publishing and events group Reed Elsevier enhanced gains as its first-half earnings beat forecasts and it reiterated its full-year outlook. Shares in advertising agency WPP advanced as it raised its 2013 growth forecast after stronger-than-expected expansion in the UK and North America. Fund Positioning The fund invest in quality businesses at attractive valuations relative to their potential earnings power on a cross-cycle basis. Positive on the consumer discretionary sector The fund maintained the allocation to advertising agencies Publicis Groupe and WPP, both of which should benefit from high emerging market exposure and strong digital businesses. It also hold Reed Elsevier as its legal, academic and medical franchises have annual subscription-based models with high visibility and free cash flows. Retain bias towards UK The portfolio continued to find many high-quality multinational businesses trading at attractive valuations, particularly in UK-listed media and financials stocks. However underweight in eurozone financials as they are relatively low-quality businesses. Nevertheless, I do hold some financials companies with solid balance sheets and strong return on equity such as Prudential and UBS. Remain underweight in financials The fund was underweight in eurozone financials as they are relatively low-quality businesses. Their products are not substantially different from competitors, as a result of which they are unable to provide high return on equity (ROE). However, it continued to find some financials companies with solid balance sheets and strong ROE such as Prudential and UBS. The fund increased the exposure to Prudential over the period. Overweight technology stocks In technology, the fund retained a position in Amadeus IT Holding, a leading information technology (IT) solutions provider to the travel and tourism sector. It continues to gain market share in its global distribution system business and expand margins through its IT solutions business. Elsewhere, the fund is finding fewer investments in the materials and telecommunications sectors.   Stanlib European Equity comment - Jun 13 Friday, 20 September 2013 Fund Manager Comment Market Environment European markets advanced in the first quarter of 2013, driven by expectations of continuing easy monetary policy by central banks. Sentiment was also boosted by positive data from major economies, notably the US and China. However, there was intermittent volatility over the period due to the Italian election impasse and the developments in Cyprus. The deadlock in Italy raised doubts about the continuation of much needed structural reforms in the country, whilst investors were worried about a possible collapse of Cyprus' banking system. At a sector level, some defensive sectors such as consumer staples and health care were among the best performers, whilst materials and utilities lagged. The eurozone's GDP came in below market expectations, shrinking by 0.6% in the fourth quarter of 2012 compared with the previous quarter. The UK's GDP also decreased by 0.3%. However, many leading economic indicators turned positive, highlighting that the eurozone's economy has probably reached a turning point. The Purchasing Managers' Index (PMI) for the manufacturing sector rose over the quarter. The Ifo German business climate index also moved upward, indicating that the sovereign debt crisis is exerting less of a drag on business activity. On the policy front, the ECB and Bank of England (BoE) left their benchmark rates unchanged at 0.75% and 0.5%, respectively. Fund Performance The fund outperformed the index and stood in the first quartile over the quarter. A cautious stance in banks helped relative performance as funding costs started to rise. Our focus on high-quality stocks was rewarded and many of my high-conviction positions contributed strongly to returns. Top Holdings Supported by Solid Earnings and Stock-Specific News Media groups Reed Elsevier, Publicis Groupe and WPP, and insurance company Prudential benefited from encouraging results. Elsewhere, Sanofi gained due to strength in the pharmaceuticals sector and after the European Medicines Agency recommended its new multiple sclerosis drugs for approval in Europe. Mixed Performance From Energy Stocks Investors reacted positively to news of Transocean's settlement on the 2010 Macondo oil spill. Conversely, the position in energy services company Saipem retreated as it lowered its 2013 guidance. I continue to hold the stock as its risk-reward potential seems to be attractive at current historically low valuations. Anglo American Detracted From Returns Whilst an underweight stance in mining added relative value, Anglo American fell on concerns over iron ore prices and fears that worker unrest at its platinum mines could hamper an overhaul effort aimed at reversing losses. However, I continue to hold this stock as the largest global platinum and diamond producer trades at a discount to its peers. Fund Positioning I invest in quality businesses trading at attractive valuations relative to their potential earnings power on a cross-cycle basis. I remain underweight in some traditionally defensive sectors, such as telecommunications and utilities, as well as industrials and materials. Conversely, I am positive on the media, energy and technology sectors. Lowered Exposure to Stocks that had Become Relatively Expensive I reduced some holdings that outperformed, such as BMW, and moved the funds into new opportunities. I also decreased the exposure to Vodafone after its share price rose on speculation of a takeover bid by Verizon. Reduced High-Beta Financials I am underweight in eurozone financials given the significant downside risk due to asset quality and high leverage. As financials had risen strongly in January, I reduced some positions such as Barclays. A portion of the proceeds were invested in Credit Suisse, as investors appear to be undervaluing management's increasing focus on its high-return private banking business. Reduced the Overweight Stance in Domestic Uk Stocks I continue to find many high-quality UK multinational businesses trading at attractive valuations. Although I reduced the allocation to advertising agencies WPP and Publicis Groupe, I continue to hold these stocks as they should benefit from high emerging market exposure and strong digital businesses.   Stanlib European Equity comment - Mar 13 Wednesday, 29 May 2013 Fund Manager Comment Market Environment European markets advanced in the first quarter of 2013, driven by expectations of continuing easy monetary policy by central banks. Sentiment was also boosted by positive data from major economies, notably the US and China. However, there was intermittent volatility over the period due to the Italian election impasse and the developments in Cyprus. The deadlock in Italy raised doubts about the continuation of much needed structural reforms in the country, whilst investors were worried about a possible collapse of Cyprus' banking system. At a sector level, some defensive sectors such as consumer staples and health care were among the best performers, whilst materials and utilities lagged. The Eurozone's GDP came in below market expectations, shrinking by 0.6% in the fourth quarter of 2012 compared with the previous quarter. The UK's GDP also decreased by 0.3%. However, many leading economic indicators turned positive, highlighting that the Eurozone's economy has probably reached a turning point. The Purchasing Managers' Index (PMI) for the manufacturing sector rose over the quarter. The Ifo German business climate index also moved upward, indicating that the sovereign debt crisis is exerting less of a drag on business activity. On the policy front, the ECB and Bank of England (BoE) left their benchmark rates unchanged at 0.75% and 0.5%, respectively. Fund Performance The fund outperformed the index and stood in the first quartile over the quarter. A cautious stance in banks helped relative performance as funding costs started to rise. My focus on high-quality stocks was rewarded and many of my high-conviction positions contributed strongly to returns. Top holdings supported by solid earnings and stock-specific news Media groups Reed Elsevier, Publicis Groupe and WPP, and insurance company rudential benefited from encouraging results. Elsewhere, Sanofi gained due to strength in the pharmaceuticals sector and after the European Medicines Agency recommended its new multiple sclerosis drugs for approval in Europe. Mixed performance from energy stocks Investors reacted positively to news of Transocean's settlement on the 2010 Macondo oil spill. Conversely, the position in energy services company Saipem retreated as it lowered its 2013 guidance. I continue to hold the stock as its risk-reward potential seems to be attractive at current historically low valuations. Anglo American detracted from returns Whilst an underweight stance in mining added relative value, Anglo American fell on concerns over iron ore prices and fears that worker unrest at its platinum mines could hamper an overhaul effort aimed at reversing losses. However, I continue to hold this stock as the largest global platinum and diamond producer trades at a discount to its peers. Fund Positioning I invest in quality businesses trading at attractive valuations relative to their potential earnings power on a cross-cycle basis. I remain underweight in some traditionally defensive sectors, such as telecommunications and utilities, as well as industrials and materials. Conversely, I am positive on the media, energy and technology sectors. Lowered exposure to stocks that had become relatively expensive I reduced some holdings that outperformed, such as BMW, and moved the funds into new opportunities. I also decreased the exposure to Vodafone after its share price rose on speculation of a takeover bid by Verizon. Reduced high-beta financials I am underweight in Eurozone financials given the significant downside risk due to asset quality and high leverage. As financials had risen strongly in January, I reduced some positions such as Barclays. A portion of the proceeds were invested in Credit Suisse, as investors appear to be undervaluing management's increasing focus on its high-return private banking business. Reduced the overweight stance in domestic UK stocks I continue to find many high-quality UK multinational businesses trading at attractive valuations. Although I reduced the allocation to advertising agencies WPP and Publicis Groupe, I continue to hold these stocks as they should benefit from high emerging market exposure and strong digital businesses.   Stanlib European Equity comment - Dec 12 Friday, 12 April 2013 Fund Manager Comment Market Environment European stocks continued to advance in the fourth quarter of 2012. Market sentiment was boosted by optimism that US lawmakers would reach an agreement on budget talks to avert the fiscal cliff, which is what eventually happened. Investor sentiment improved further after European leaders approved the release of the next tranche of bailout funds for Greece. Improvements in economic indicators also brought cheer to the market. Investors increasingly focused on growth themes and moved out of traditionally defensive sectors. Financials and cyclical areas such as consumer discretionary, industrials and information technology were the best performing sectors, whilst utilities and telecommunications companies lagged. Data releases revealed that the eurozone's GDP contracted in the third quarter by 0.1%. However, the two largest economies, France and Germany, remained in positive territory, as their GDP grew by 0.2% each. UK's economy expanded 0.9% in the third quarter of 2012. Economic data in December improved. In particular, Germany's ZEW economic sentiment turned positive in December for the first time since May 2012, which shows that financial market experts expect economic activity to stabilise by early summer 2013. The Purchasing Managers' Index (PMI) for eurozone industry rose marginally over the month, to 46.3. A figure of below 50 indicates a contraction in manufacturing activity; however, the upward trend remains intact. Fund Performance The fund underperformed the index over the quarter. My focus on less volatile, highquality companies detracted from relative returns as investors continued to favour riskier, low-quality stocks. Conversely, a cautious stance in utilities and telecommunications aided relative performance as these defensive sectors lagged most cyclical areas. Energy stocks dampened returns Shares in Saipem fell as project delays led to broker downgrades and its CEO resigned after a probe into alleged corruption practices in Algeria. Nevertheless, its longer-term outlook remains positive and its stock price is likely to gain when these big projects start coming through. High-quality firms lagged Swedish Match hurt returns as it released weak results and lowered its outlook. Although there is short-term uncertainty related to the snus price war in Sweden, the longer-term thesis remains vali d. It has a dominant position in the Scandinavian snus market and strong pricing power. Selected consumer discretionary and financials stocks added value UBS confirmed my buy thesis by announcing cost savings and job cuts at its low return investment banking unit as part of its downsizing efforts in that department. Its thirdquarter wealth management and investment banking earnings were also above forecast. Solid vehicle sales and positive news on Chinese manufacturing data boosted the holding in automobile major BMW. Fund Positioning I invest in quality businesses trading at attractive valuations relative to their potential earnings power on a cross-cycle basis. I remain underweight in some traditionally defensive sectors such as telecommunications and utilities, and have an overweight stance in consumer staples and health care. I am cautious on industrials, materials and eurozone banks, but remain positive on media and energy. Retain bias towards UK-listed firms I continue to find many high-quality multinational businesses, particularly in UK-listed media and financials stocks. Conversely, I am underweight in eurozone financials given the significant downside risk due to asset quality and high leverage. Remain positive on cash generative media stocks I maintained the allocation to advertising agencies WPP and Publicis Groupe, which should benefit from high emerging market exposure and strong digital businesses. Reed Elsevier's legal, academic and medical franchises have annual subscription-based models with high visibility and free cashflows. Increased exposure to undervalued stocks I increased the position in Sanofi, a diversified global health care business. Although investors are worried about patent expiries, these products now account for less than 10% of sales and many of its divisions are unaffected by this issue. IIn contrast, I reduced the allocation to some key contributors such as SAP, Diageo and BMW.   Stanlib European Equity comment - Sep 12 Monday, 19 November 2012 Fund Manager Comment Market Environment European equities advanced over the quarter, driven by stimulus measures or accommodative policy actions by global policymakers, notably European Central Bank (ECB) President Mario Draghi's "do whatever it takes to save the euro" speech in July. The initial reaction to his speech and the subsequent announcement of a framework for sovereign bond purchases in early September was one of euphoria, as investors perceptions of the risk of sovereign defaults fell with the ECB's outline of potential action. The Federal Reserve's announcement of further quantitative easing also improved financial market conditions and confidence. During this period, more volatile, lower quality companies rose sharply, whilst higher quality stocks lagged. At a sector level, financials stocks surged following Draghi's speech, and within the sector, those with the weakest balance sheets and highest credit default costs outperformed the most. Information technology firms also performed well and materials companies followed commodity prices higher. Conversely, defensives, including telecommunication services and utilities, lagged other sectors. On the economic front, global economic fundamentals continued to deteriorate. This has now spread from being weakness in lead indicators into declines in new orders, even in stronger economies such as the US and Germany. Fund Performance The fund underperformed the index over the quarter. Although the fund performed well until late July, my focus on less volatile, higher quality companies detracted from returns as low quality stocks rallied on the ECB's positive announcements. However, performance improved again on a relative basis towards the end of September. Overall, media and technology positions added value, whilst consumer staples and energy holdings detracted from returns. Resource stocks dampened returns The position in Anglo American retreated owing to weak results and a strike in South Africa. I remain invested in the stock as it is cheaply valued and has attractive commodity exposure to copper, diamonds and platinum. Some consumer names detracted from performance I bought shares in Danone following its June profit warning, but the position hurt returns as brokers continued to downgrade it on earnings risk. Elsewhere, the position in Burberry was reduced, but a profit warning dragged on the holding. Media and technology holdings added value A new position in advertising agency Publicis Group benefited from better-than-expected results. Software firm SAP was boosted by its upbeat earnings, indicating healthy license growth, particularly in its in-memory database HANA, across regions. Fund Positioning The fund's positioning reflects my bias towards higher quality business models across sectors. I am underweight in some 'traditional defensive' sectors such as telecommunications and utilities, but maintain an overweight stance in consumer staples and health care. In addition, I am cautious on eurozone financials, industrials and materials. I have an overweight exposure to technology, media and energy. Retain bias towards UK-listed firms I continue to find many high-quality UK multinational businesses trading at attractive valuations. In particular, I am finding such opportunities in UK-listed media and financials stocks. Conversely, I am underweight in Eurozone financials, where I reduced positions during the quarter. Increased media and consumer staples exposure I initiated holdings in advertising agencies with strong franchises such as WPP and Publicis. I also bought shares in food producers with pricing power that operate in industries with significant entry barriers. These include Nestle and Danone. Reduced allocation to chemicals I sold positions in chemicals stocks such as Lanxess, Umicore and BASF, where valuations are near long-term highs and well above previous trough levels. I prefer energy holdings instead, where I bought John Wood Group, which is well-pos.   Stanlib European Equity comment - Jun 12 Wednesday, 22 August 2012 Fund Manager Comment Market Environment European markets retreated in the second quarter of 2012. There were concerns about the possibility of Greece exiting the eurozone and weakness in Spain's banking sector, which drove the euro lower. However, later in the period, sentiment stabilised following the victory of Greece's pro-bailout New Democracy party. Additionally, European leaders scrapped the requirement that governments get preferential status over private investors in the event of a bank default and eased terms for future bailouts. They also agreed to set up a supervisory system for eurozone banks leading towards full banking union. Overall, defensive sectors, such as consumer staples and health care, outperformed cyclical sectors as investors looked for safer stocks. Meanwhile, energy and materials companies followed oil and commodity prices lower. Data releases revealed that the eurozone's GDP was flat in the first quarter of 2012. A surprisingly strong 0.5% expansion in Germany saved the bloc from a recession, even as the French economy stalled and Italy reported a decline. The UK technically slipped back into a recession as its GDP contracted by 0.3%, following a 0.4% decline in the fourth quarter of 2011. Most economic indicators turned negative in the second quarter. Eurozone's Purchasing Managers' Index (PMI) and Economic Sentiment Indicator slid during the period, highlighting the uncertain economic environment. Fund Performance The fund underperformed the index over the quarter. Selected positions in the financials and materials sectors dampened returns. Meanwhile, an overweight stance in health care enhanced relative performance as investors preferred defensive stocks. The positioning in technology also added value. Materials exposure detracted from returns The mining and chemicals sectors were negatively impacted by expectations of lower economic activity and weak commodity prices. In particular, synthetic rubber producer Lanxess, which was a key contributor in the previous quarter, gave up some of its gains. Overweight in financials hurt performance Selected financial holdings were hit by general concerns about the eurozone credit crisis. The position in Barclays further hampered returns due to negative news flow related to major banks influencing inter-bank lending rates. I continue to hold the stock as it is attractively valued and has manageable peripheral eurozone exposure. Industrials stocks added value The position in aerospace and defence group Rolls-Royce benefited from new orders.   Stanlib European Equity comment - Mar 12 Friday, 29 June 2012 Fund Manager Comment Market Environment After a volatile period last year, European equities advanced in the first quarter of 2012. There was optimism that the sovereign debt issue is becoming manageable. The European Central Bank (ECB) allotted a further €529.5 billion ($712.81 billion) to 800 lenders at a very low interest rate under its three-year Long Term Refinancing Operation (LTRO). Meanwhile, eurozone finance ministers agreed to give Greece a new €130 billion bailout. Positive economic signals from Europe, the US and China further supported markets. Financials and cyclical sectors, including consumer discretionary, information technology and industrials outperformed as investors' risk appetite increased. Meanwhile, energy firms and defensive areas, such as telecommunications and health care, lagged. Data releases revealed that the eurozone's GDP contracted by a less-than-expected 0.3% in the fourth quarter of 2011. UK GDP was estimated to have contracted by 0.3%. Elsewhere, sentiment indicators improved over the fi rst quarter of 2012. The Economic Sentiment Indicator for the eurozone rose in January and February, signalling improved growth rates in the second half of the year. Germany's business sentiment indicator, the Ifo business climate index also advanced in light of improving confidence in the country's growth. Fund Performance The fund outperformed the index and stood in the first quartile over the quarter. Stock selection in the health care and materials sectors added value. Meanwhile, investors preferred cyclical areas as their risk appetite rose. Hence, the overweight stance in technology, energy and consumer discretionary, and a cautious position in utilities added relative value. Conversely, stock picking in industrials and consumer staples hurt returns. Encouraging earnings supported chemicals stocks Synthetic rubber producer Lanxess contributed to performance given its solid guidance and healthy results, reflecting strong pricing power in its top-end products. Meanwhile, catalytic converter group Johnson Matthey added value as its quarterly sales were boosted by market share gains in China and a rise in North American truck demand. Bias towards technology buoyed returns Apple's stock added value due to upbeat results, an unexpected dividend and share repurchase programme, and the successful launch of its latest iPad tablet upgrade. Software group SAP also advanced in view of solid dividends and strong license sales in the fourth quarter, with excitement about its new product HANA. Investor demand for cyclicals impacted defensive stocks Shares in Vodafone detracted from returns due to fears that its revenue guidance would be lowered in May, when it announces its fi nancial year results. Other defensive holdings, such as Shire, Unilever, Roche and Fresenius Medical Care, also weighed on performance. Fund Positioning I am concentrating on areas where European companies can generate superior and sustainable growth. I continue to focus on firms with pricing power and exposure to fast growing geographies. Retained the bias towards technology, materials and consumer discretionary I am tapping into the increased discretionary spending power of emerging market consumers by buying shares in companies that cater to these high-growth markets. BMW, Burberry, LVMH and Volkswagen are major overweight positions under this theme. In technology, I remain positive on software firm SAP, which is expected to benefit from a cyclical upturn in license sales. The company's longer-term growth will be driven by emerging markets and business intelligence. The reorganization of the business under its new management team also presents margin upside potential. Moved to an overweight exposure to financials I increased positions in a few banks with sufficient capital, including Barclays and Lloyds Banking Group. I also added to attractively valued insurance groups that provide high dividends such as AXA and Allianz. Increased the cautious stance in health care, telecommunications and utilities I reduced the exposure to some stocks that had contributed significantly in 2011 such as Vodafone, Shire and British American Tobacco. However, I retained the bias towards British American Tobacco, which has high emerging market exposure and strong pricing power.   Merger Thursday, 6 October 2011 Fund Manager Comment The following funds merged into the Stanlib European Equity Fund effective 29/09/2011: Stanlib Offshore Euro Blue Chip Fund Stanlib Offshore European Smaller Companies Fund Stanlib Offshore United Kingdom Fund   Stanlib European Equity comment - Jun 11 Monday, 19 September 2011 Fund Manager Comment Fund Review European equities made a small positive gain in the second quarter of 2011, despite lingering worries over the sovereign debt crisis in peripheral Europe and concerns about the next phase of global growth. In June, the Greek Parliament passed the austerity measures and fi scal reforms required to secure more emergency funds that will enable it to avoid a default on its debt. Healthy corporate earnings growth and robust balance sheets were the key factors supporting the market. Cyclical and defensive segments generated mixed performance; health care and consumer discretionary advanced strongly, whilst energy and information technology lagged. The eurozone's GDP expanded by 0.8% in the fi rst quarter of 2011, compared to a 0.2% increase in the previous quarter. The UK economy rebounded sharply, with GDP increasing by 0.5% in the fi rst three months of 2011. Meanwhile, the European Central Bank raised interest rates from a low of 1.00% to 1.25% in April to curb infl ationary expectations, whilst the Bank of England kept rates at a low of 0.5%. On the corporate front, I/B/E/S analyst forecasts point to an aggregate earnings expansion of 11.7% in 2011 and 12.9% in 2012 for the MSCI Europe Index. Fund Performance The fund underperformed its benchmark over the quarter. Stock selection in technology, health care and energy detracted, whilst consumer discretionary names contributed. Pro-cyclical stance held back performance A cautious stance in major pharmaceutical fi rms held back relative returns because the segment benefi ted from positive news on drugs and market demand for defensive stocks. Not holding Nestle, which is expensively valued, hurt relative performance as the consumer staples sector found favour and the company's fi rstquarter revenues surpassed estimates. Energy names detracted from returns Shares in Gazprom came under pressure due to the possibility that the Russian government would impose higher taxes on the gas sector and/or reduce domestic gas prices. The holding in Transocean fell after it was sued by BP for liability arising from the oil well leak in the Gulf of Mexico last year. This move was expected as the deadline for parties to fi le suit against each other expired in April. Consumer fi rms added value A position in Volkswagen gained as its fi rst quarter profi ts were lifted by strong vehicle sales in North America and Asia. Shares in Burberry surged in view of solid quarterly sales, driven by demand for luxury brands from developing markets. The holding in BMW also advanced following its reassuring update. Fund Positioning I remain positive about the outlook for European equities as valuations are attractive and the global economic environment is improving. The continued focus on budget defi cits in peripheral Europe ignores the fact that the vast majority of eurozone's GDP comes from outside these countries. Many companies in core European markets are enjoying strong profi t growth as they are benefi ting from exposure to fast-growing emerging markets. Continued focus on names that benefi t from pricing power I prefer companies that have the ability to generate strong cashfl ows and maintain a clear focus on creating shareholder value. Currently, there is no shortage of such stocks at attractive valuations in Europe, and I bought a stake in British American Tobacco during the quarter. Maintained the exposure to benefi ciaries of a recovery in global growth In terms of sectors, my core views have not changed. The fund remains biased towards cyclical areas such as consumer discretionary, materials, industrials and energy. Moved out of stocks whose investment thesis weakened The position in Man Group was sold as the company's ability to raise funds in Japan, which is its major fund raising market, was impacted due to the earthquake. In the energy sector, I moved out of the holding in Petrobras, which is facing political problems and major headwinds in its downstream business.   Stanlib European Equity comment - Mar 11 Tuesday, 14 June 2011 Fund Manager Comment Fund review European equities rose in the fi rst quarter of 2011 despite a volatile market environment. The sovereign debt crisis in Europe was the focus of attention. The region's fi nance ministers agreed to bolster the European Union rescue fund, which encouraged investors to rotate back into eurozone assets trading at attractive valuations. However, the Japanese earthquake and civil unrest in the Middle East and North Africa led to risk aversion once again. Energy shares rose on higher fuel prices as the turmoil in Libya and other petroleum producing nations led to concerns of supply side disruption. Overall, sectors and styles that underperformed in 2010 did well in the fi rst quarter of 2011, and vice versa. Information technology (IT) and fi nancials names posted the best returns, whereas consumer related companies lagged the market. The eurozone's GDP expanded by 0.3% in the fourth quarter of 2010, whilst the UK's GDP contracted by 0.5%. Recent reports reveal that eurozone's manufacturing activity accelerated and economic sentiment improved over the fi rst quarter. I/B/E/S analyst forecasts point to an aggregate earnings expansion of 13.6% in 2011 and 12.7% in 2012 for the MSCI Europe Index. Fund Performance The fund underperformed its benchmark over the quarter. A bias towards companies with exposure to emerging markets and consumer demand therein negatively impacted returns. The positive contribution from stock picking in consumer staples was offset by holdings in the more cyclical industrial, materials and consumer discretionary sectors. Industrials and materials detracted from returns As a result of a rotation out of stocks with exposure to emerging market growth, selected companies in the industrial and materials sectors held back returns. A move away from consumer cyclicals hurt returns Shares in luxury goods fi rms such as LVMH and Richemont, which have been benefi ting from strong Asian demand, declined over the quarter. Rising input costs combined with concerns that the Japanese earthquake would negatively impact demand also weighed upon investor sentiment. Stock picking in technology and health care contributed An overweight position in SAP boosted returns after the company announced double-digit revenue growth forecast for 2011 together with new, innovative software applications. Not holding Nokia helped relative returns. Exposure to Shire Pharmaceuticals bolstered returns as the company has consistently achieved strong earnings results and enjoys a robust product pipeline. Fund Positioning The key change to the positioning over the quarter was a rotation from smaller to larger companies. The portfolio continues to be a blend of styles with a slight growth tilt. It is biased towards the more cyclical consumer discretionary and IT sectors, but is now overweight in energy relative to its benchmark. Conversely, the portfolio has less exposure to consumer staples, telecommunications and utilities. Reduced holdings in consumer stocks Profi ts were taken in selected consumer discretionary stocks, such as Burberry, Swatch, Richemont and LVMH, and assets were taken out of consumer stocks that have enjoyed strong gains. Increased energy exposure The position in oil and gas producers with relatively low political risk, such as Gazprom was increased. The outlook for this year is improving as a result of stronger European gas demand, robust commodity price s for exports and rising domestic gas prices. Shares in energy services companies, such as Transocean and BG Group, were purchased as they benefi ted from a recovery in capital spending. Moved up the market-cap scale Smaller companies performed well, so assets were moved up the market-cap scale. In absolute terms, over half the portfolio is invested in larger companies, whereas it is still overweight in the mid- to small-cap segment relative to the benchmark   Stanlib European Equity comment - Dec 10 Thursday, 24 February 2011 Fund Manager Comment Fund Review European equities rose in the fourth quarter of 2010, despite worries about the debt crisis in Ireland and its spread to other peripheral economies. In order to try to quell the contagion, the European Union handed Ireland an €85 billion aid package. Additionally, the European Central Bank delayed the withdrawal of its emergency liquidity measures and bought government bonds in Portugal, Ireland and Greece. Equities were also supported by encouraging earnings results and better-than-expected economic data. At a sector level, materials and energy stocks tracked rising commodities and oil prices. Conversely, investors sold shares in financials. Eurozone's economic growth slowed to 0.4% in the third quarter, while the UK's GDP showed a surprisingly strong increase of 0.7%. In the eurozone, industrial activity improved and key sentiment indicators moved up over the fourth quarter, although the unemployment rate remained high. European companies continued to deliver encouraging earnings. I/B/E/S analyst forecasts point to an aggregate earnings expansion of 35.4% for 2010 and 15.2% for 2011 for the MSCI Europe Index. Fund Performance The fund outperformed its benchmark over the quarter. Stock picking within financials helped returns, as did holdings in the industrials, materials and energy sector. Technology stocks detracted from relative returns, as did selected holdings in the consumer staples sector. The contribution from financials was mixed The overall underweight in financials positively contributed to returns, although at a stock level, there were some key contributors and detractors. A below-benchmark exposure to Banco Santander was the largest contributor at a stock level; however, holdings in Intesa Sanpaolo and Barclays were among the key detractors. Industrials and materials positions rose strongly A selection of smaller holdings in the industrials sector helped relative returns. Within materials, LANXESS is experiencing growth in emerging markets and demand in developed markets is set to increase as tyre labelling legislation, which favours higher performance tyres, is being introduced. Consumer staples positioning hurt. An underweight stance in food producer Nestle detracted from relative returns. Additionally, brewers Anheuser-Busch InBev and Carlsberg were hindered by investor concerns that 2011 would not be as good a year for them as 2010. Fund Positioning At a high level, the portfolio continues to be a blend of styles, but with a slight growth tilt. As a result of stock selection, the portfolio is tilted towards more cyclical stocks, such as selected consumer discretionary, technology, materials and industrial stocks, and has less exposure to the more defensive consumer staples, utilities and telecommunications stocks. In terms of market cap, the bias is more towards small and mid-cap stocks. Pricing power is the key Names with pricing power will be traded at a premium, as it will be difficult to achieve growth without this competitive advantage. Some of the areas with strong pricing power are luxury goods, automobiles, brewing and data services for mobile telecommunications. We have increased the holding in LVMH, which is benefiting from pricing power due to the strength of its brand; other such major positions include BMW, Carlsberg and Vodafone. Increased exposure to materials We have added to our position in miners Anglo American and Rio Tinto and in chemicals firm Umicore. We also added to LANXESS, which has a leading position in the oligopolistic synthetic rubber industry. Reduced holdings in financials We trimmed exposure to banks amid an uncertain financial environment in light of the debt problems in peripheral eurozone countries. In particular, we moved out of Banco Santander and lowered exposure to BBVA, UBS and Lloyds Banking Group.   Stanlib European Equity comment - Sep 10 Wednesday, 5 January 2011 Fund Manager Comment Fund Review Financials again came under pressure in August along with cyclical areas of the market. Positions in Intesa Sanpaolo and AXA were among key detractors, while having no exposure to Unicredit and BBVA added to relative performance. As macroeconomic uncertainty grew over the month, investors favoured defensive sectors such as health care. Consequently, an underweight stance in pharmaceutical fi rms like GlaxoSmithKline and Novartis detracted from relative returns. Materials stocks were hurt by a decline in metal prices amid concerns about demand. Shares in construction materials fi rm CRH slid as the fi rm warned its earnings are expected to fall this year, driven by a weakening economic recovery in the US. Post the sell-off, the valuation for CRH has became more attractive and the reaction seems to be overdone. Within materials, positions in Centamin Egypt and Mineral Deposits rose signifi cantly. As a result of stock picking by the underlying managers, the fund continues to be overweight consumer discretionary fi rms with a focus on media names including PPR, Pearson and Reed Elsevier. The managers are also fi nding opportunities in information technology sector including Neopost and Software. Key underweight areas are utilities and telecommunication services fi rms. The country weightings are a residual of the bottom-up stock picking. The fund's largest absolute holdings are in the UK, while France and Ireland are the biggest in relative terms. The market cap weightings are a residual of the bottom-up stock picking. The portfolio overall tends to be positioned in the £1bn - £10bn market cap when compared to its benchmark. Intesa Sanpaolo continues to be a large overweight position. The Italian bank has been one of the most conservative in its lending practices. Signifi cant cost cuts are expected by management that has demonstrated a solid track record. The bank enjoys strong growth fundamentals in a consolidating Italian market. AXA is also among top active holdings in the portfolio. The company is a market leader in the insurance sector and will benefi t from the requirement for longterm savings. It remains well-positioned for a recovery in the fi nancial markets because it is priced positively and should benefi t as asset values rise.   Fund Name Changed Thursday, 22 July 2010 Official Announcement The STANLIB Offshore European Growth Fund will change it's name to STANLIB European Equity Fund, effective from 22 July 2010   Stanlib European Growth comment - Dec 09 Friday, 19 March 2010 Fund Manager Comment A normalisation of risk and reduced volatility will encourage more investors back into the market and bring about a resurgence of fundamental stock picking. The European economy has started to show real signs of improvement and forward looking indicators are also signalling that the recovery is on track. The fund is positioned to take full advantage of an improving environment in which investors refocus on earnings, balance sheets and robust businesses. Overweight stance in financials maintained, despite reduced exposure While financials have seen a large upheaval and posted good returns, I believe there is still plenty of upside in selected stocks. Many stronger banks have bought good assets at cheap prices and this will lead to healthy long-term outperformance. Hence, I maintain a significant bias towards financials, although I reduced exposure to some banks that seemed fully valued or appeared risky based on leverage and capital. A pro-cyclical bias retained Given my belief that the economic recovery will continue, the fund has overweight holdings in the most economically-sensitive sectors, notably consumer services and materials firms. Underweight in defensives Relatively expensive utilities and consumer staples firms, which   Stanlib European Growth comment - Sep 09 Monday, 30 November 2009 Fund Manager Comment The fund underperformed its benchmark over the quarter despite generating strong returns. The position in generics drug firm Teva Pharmaceutical Industries detracted amid speculation about its acquisition of Shire. The company's latest quarterly earnings were above consensus estimates and it offers excellent long-term prospects in the fastgrowing generic drug market. Stock selection in financials proved unfavourable; an initial underweight stance inHSBCHoldings weighed upon relative returns. However, I bought this holding gradually with its encouraging results, adding to the confidence in the stock. Some insurers and banking names, such as Credit Agricole, KBC Groupe and Prudential, featured among the top contributors on account of their promising results. Although Volkswagen's stock declined following news that it was to acquire a stake in Porsche's core sports car business, its preferred shares held in the fund contributed strongly.   Stanlib European Growth comment - Jun 09 Friday, 18 September 2009 Fund Manager Comment The fund underperformed its benchmark over the quarter despite generating strong returns. As stock markets began to recover, investors moved out of defensive areas, which helped a cautious stance in consumer staples within the fund, but weighed upon health care stocks including Roche and Teva Pharmaceutical. Roche was also hit by news that its key cancer drug Avastin failed to prevent the recurrence of colon cancer after surgery. Although I trimmed this position, I maintain the holding in view of its visible growth prospects and undervalued synergies from Genentech's acquisition. Moreover, generic drug firm Teva Pharmaceutical should not suffer unduly from the economic slowdown. On a positive note, positions within financials were boosted by hopes that monetary and fiscal measures are taking effect as key banks reported solid performance. In particular, Deutsche Bank, Credit Suisse, DnBNORand BNP Paribas contributed.   Stanlib European Growth comment - Dec 08 Wednesday, 25 March 2009 Fund Manager Comment The fund underperformed its benchmark over the quarter. Concerns about capital adequacy continued to impact financials. Shares in BNP Paribas were further affected by the Belgian court's review of its deal with Fortis. Banking stocks have suffered significantly in the recent turmoil, but well-financed banks will prove to be long-term winners. An underweight in some oil stocks that held up well despite the fall in oil prices hurt relative returns. Within the sector, I purchased names with strong cash position and sustainable reserves. Defensive positions such as Roche, found favour amid volatile market conditions. News related to drug approvals and impressive sales of a key cancer product by its subsidiary further helped shares in Roche. A holding in Munich Re benefited from its reassuring third-quarter results, and improved competitiveness on the basis of a well-capitalised base.   Stanlib European Growth comment - Sep 08 Friday, 14 November 2008 Fund Manager Comment Over the quarter, the fund underperformed its benchmark. An oil price decline hurt energy and utility holdings, such as Gazprom. Difficult liquidity conditions and political uncertainty due to Russia's incursion into Georgia further dented the firm's share price. I have reduced the position in this prominent gas producer to pare direct exposure to emerging markets, which might face a slowdown in demand from developed economies. An exposure to diversified financials also inhibited returns due to concerns about the firms' solvency and capital adequacy. Within the sector, I continue to hold companies that are attractively valued and have re-capitalised successfully. On a positive note, SAP contributed following upbeat quarterly results, with solid contribution from license revenues. Shares in HSBC, which enjoys a sizeable deposit base, also advanced after the bank abandoned plans to acquire a controlling stake in Korea Exchange Bank in view of the latter's falling asset value.   Stanlib European Growth comment - Jun 08 Thursday, 18 September 2008 Fund Manager Comment The fund significantly outperformed its benchmark over the quarter and achieved first-quartile positioning. o A cautious stance towards banks proved helpful, as they continued to report losses from their exposure to risky assets. In the steel sector, ArcelorMittal made a positive contribution, as a tight supply situation coupled with high demand from emerging markets boosted the company's share price. Energy firms supported returns amid a surge in oil and gas prices and the discovery of new reserves. Among others,StatoilHydro's profits were bolstered by increased production and rising oil prices. Although not holding BP proved detrimental to performance, I believe it will face a challenging operating environment due to increased investment in new production.   Stanlib European Growth comment - Mar 08 Friday, 11 July 2008 Fund Manager Comment Siemens' share price fell after the firm reported write-downs related to contracts arranged by its previous management, although it did recover somewhat later in the period. The charges are likely to have a short-term impact on its shares; however, restructuring by the new management team is expected to reduce costs and optimise processes in the long run. Nonetheless, partly as a consequence of this, I reduced my exposure to this stock. A holding in Vodafone also hurt performance amid worries about the impact of proposed regulatory changes in Europe. However, it should benefit from growth in mobile data. Elsewhere, an underweight in Volkswagen also affected fund performance over the three months, as the share price benefited from continued speculation about Porsche's bid for it. However, I believe that Volkswagen is likely to see falling demand for its cars, as consumers reduce their expenditure on big-ticket items.   Stanlib European Growth comment - Dec 07 Thursday, 6 March 2008 Fund Manager Comment Holdings in chemicals companies catering to the buoyant agricultural commodities market supported returns. Higher prices of farm output and increased crop plantation for biofuel resulted in strong product demand for seed producer Monsanto and Bayer's crop division. Underweight exposure to banks also added to relative returns, as the credit market crisis intensified. Oil & gas stocks, such as Petrobras, benefited from rising product prices and optimism about their new exploration in Brazil. Conversely, the overweight position in oil equipment & services firms proved detrimental to performance due to concerns about the pricing environment in 2008 and project execution delays. However, the long-term outlook for the sector should remain positive as capacity constraints are resolved and benefits of the upcoming projects materialise.   Stanlib European Growth comment - Sep 07 Tuesday, 27 November 2007 Fund Manager Comment Over the quarter, the fund significantly outperformed its benchmark. Following a period of transition, due to a change of manager, the fund moved into the first quartile relative to its peer group for the quarter and year to date. An underweight position in banks added value, as problems in the credit market began to unravel and investors became wary of the impact of defaults in high-risk home loans. Exposure to the oil equipment & services sector benefited from encouraging results and a slew of new contracts. Increased spending on exploration by oil & gas firms presents significant opportunities for players in this segment. Elsewhere, shares in mobile phone manufacturer Nokia were boosted by its robust second-quarter results and successful launch of new products. Conversely, a cautious approach towards food producers proved unfavourable to relative returns, as they gained from healthy results. However, the surge in prices of soft commodities, such as milk and coffee, remains a concern for the sector.   Stanlib European Growth comment - Jun 07 Tuesday, 25 September 2007 Fund Manager Comment During the quarter, the fund outperformed its benchmark. Following a period of transition due to a change in manager, the fund moved into the first quartile relative to its peer group. Holdings in the industrials sector proved rewarding. Bayer, the German drug manufacturer with exposure to chemicals, contributed following improved profit forecasts with increasing orders globally. Shares in German utility E.ON also contributed, as it benefited from a tight supply-demand situation. The manager's decision to avoid GlaxoSmithKline and Sanofi-Aventis aided returns, as both companies face a tough period following negative news about their products. Conversely, an underweight in integrated oil majors detracted, since these firms gained from higher oil prices and healthy results. However, the exposure to oil service firms that are benefiting from increased spending by these oil companies contributed to returns.   Stanlib European Growth comment - Mar 07 Thursday, 24 May 2007 Fund Manager Comment During the quarter, the fund marginally underperformed its benchmark, the FTSE World Europe Index. Despite this, the fund was positioned in the second quartile compared with its competitors. Key positions in the banking sector weighed upon performance, following mixed results and concerns about rising mortgage defaults in the US. Moreover, the fund did not have exposure to a Dutch bank, which benefited from takeover discussions. A holding in French telecommunications equipment manufacturer Alcatel-Lucent proved detrimental, after the company warned that the uncertainty created by its recent mergers would hurt sales and profit growth. However, the company should gain from long-term merger synergies. Exposure to support services companies added value, as these firms announced new contracts and strong full-year profits. Additionally, holdings in Italian automobile firm Fiat and Swiss watch manufacturer Swatch found favour in light of their robust earnings and optimistic outlook.   Stanlib European Growth comment - Sep 06 Monday, 26 March 2007 Fund Manager Comment During the quarter, the fund returned 4.2% in euro terms, underperforming the benchmark index, which returned 6.8% over the same period. Overall, relative performance was hurt by disappointing sector allocation. Exposure to oil & gas producers detracted from returns, amid a fall in oil prices and lower production targets by some companies. In particular, an Austrian oil-refining company hurt performance; its share price fell in light of disappointing second-quarter results. Furthermore, individual holdings in the technology-hardware sector also proved detrimental, as shares were led down by profit warnings and weak expectations for the coming quarter. Conversely, stock selection in the pharmaceutical sector worked well; avoiding a number of large-cap pharmaceutical stocks, which had a poor quarter, limited the underperformance. An underweight in mining stocks also proved beneficial, as the sector underperformed the benchmark.   Stanlib European Growth comment - Dec 06 Monday, 26 March 2007 Fund Manager Comment During the quarter, the fund returned 7.9% in euro terms, outperforming the benchmark index, which returned 7.0% over the same period. Performance was buoyed by successful stock selection. Individual holdings in banking and oil services companies worked well. In particular, stock selection in the banking sector proved rewarding. Oil services stocks continued to benefit from the attractive pricing environment for their products and services. Successful stock selection within the media sector also enhanced returns, led by the sale of shares in a UK broadcasting company at a premium to the market price to a strategic buyer. A lack of exposure to tobacco stocks involved in takeover activity weighed upon performance, as did selective holdings in the leisure sector, driven by the decline in the share price of a global online-gaming operator.   Stanlib European Growth comment - Jun 06 Tuesday, 28 November 2006 Fund Manager Comment During the quarter, the fund returned -6.0% in euro terms, underperforming the benchmark, which returned -2.6% over the same period. The relative underperformance of small and medium-sized companies hurt portfolio returns over the period. In addition, individual holdings in the pharmaceuticals sector detracted from returns as a number of companies declared disappointing results. Elsewhere, high exposure to stocks in the oil & gas producers sector proved detrimental. Notably, OMV, the Austrian oil refining company, saw its share price fall early in the period following the failed takeover bid for Verbund. On a positive note, successful stock selection in the oil services sector added value as the fund's holdings were buoyed by strong corporate results and positive expectations. In addition, low exposure to the insurance and electronic & electrical equipment sectors also contributed to returns, given their below-average performance.   Stanlib European Growth comment - Mar 06 Friday, 25 August 2006 Fund Manager Comment Performance was enhanced by successful stock selection, particularly in the oil services and software sectors. The fund's holdings in a number of specialised oil-service stocks involved in oilfield production, drilling, and construction services performed well as demand for exploration services remained strong. Elsewhere, companies involved in the provision of high-speed internet access contributed to returns as subscriber growth and demand remained strong. The fund's performance was further boosted by its low exposure to telecommunication services stocks. The telecommunications sector once again underperformed the broad market during the quarter, due to ongoing concerns over revenue growth in the industry. The fund retained its bias towards medium-sized companies, although its exposure to larger companies has increased as valuations of individual stocks have become attractive. During the quarter, the manager increased the fund's exposure to oil-service stocks due to the improving environment for service companies involved in drilling and rig construction. Following strong contributions from oil-refining-related companies, the manager took profits many of these positions. The fund retained its relatively low weighting in the banking sector, although its underweight bias declined as the manager increased the fund's exposure to a number of Swiss, UK, and French banks. In terms of emerging Europe, the manager reduced the fund's position in Turkish stocks from 4.3% at the end of December 2005 to 2.9%. Many of these holdings have been major contributors to performance, and therefore the manager took profits and reinvested the proceeds into companies in which he had higher conviction about valuation and earnings.   Standard Bank European Growth comment - Sep 05 Tuesday, 20 December 2005 Fund Manager Comment Successful stock selection, particularly in the oil & gas and banking sectors, was a major contributor to performance. The oil & gas sector benefited from a consistently high oil price, and oil refining companies have also performed well as refining margins have remained robust. The fund's large holding in Austrian refiner OMV was a substantial contributor to returns during the period, due to an increase in profitability in the refining industry. In addition, the company has benefited from a significant acquisition made in Romania. Other large holdings in the oil sector, including Cairn Energy and Repsol, helped returns. Within the banking sector, a number of Turkish banks performed well. Another notable contribution came from Standard Chartered Bank after it reported first-half earnings that exceeded expectations. During the quarter, the manager continued to search for individual companies whose share prices were not reflecting their future potential. The fund continued to have a bias towards medium-sized companies, and was well diversified with 236 holdings. The manager increased the fund's exposure to the resources sector, notably to mining stocks. This was based on the view that stocks in the sector will benefit from rising commodity prices. A substantial position was established in diversified mining company Rio Tinto, as its valuation was attractive relative to other mining stocks, and it is expected to benefit from strength in iron ore prices. The manager reduced the fund's exposure to areas of the market in which he has less conviction, notably to the cyclical service and basic industries sectors. In terms of country positioning, the fund retained its underweight exposure to core eurozone markets - notably France - as the manager finds few compelling undervalued investment opportunities in the area.   Standard Bank European Growth comment - Jun 05 Thursday, 17 November 2005 Fund Manager Comment European stock markets fell in April as investors became concerned over the pace of European and global economic growth, and consumer discretionary stocks - the fund's largest overweight position in sector terms - were among the principal losers. Nevertheless, European equities, and the fund, enjoyed a reversal of fortune in May and June to finish the period strongly. Looking at the period as a whole, returns were driven by strong stock selection, particularly within the banking sector; in particular, the fund's holdings in selected Turkish banks boosted performance, while the manager's continued avoidance of some of the major UKbanks also proved beneficial. Returns were also enhanced by strong stock selection in the oil & gas, insurance, and beverages sectors; within the oil & gas sector, a notable contribution came from an Austrian oil & gas company. During the quarter, the portfolio remained unchanged with the manager searching for individual companies where their future potential is not being reflected by the share price. The fund continued to have a bias towards medium-sized companies and was well diversified, with 236 holdings. At sector level, the fund continued to have a high weighting in cyclical-service stocks. The fund is structurally underweight the large cap sectors, including banks and pharmaceuticals. However, since last year the portfolio's exposure to the large-cap resources sector has moved higher following the strong performance of these stocks. In addition, the manager increased the portfolio's exposure to oil given the improved prospects for the sector. Within the sector, the manager found attractive opportunities in oil-refining companies and oil services.   Standard Bank European Growth comment - Mar 05 Friday, 1 July 2005 Fund Manager Comment The fund benefited from successful stock selection, particularly in the banks, transport, and media & entertainment sectors. Meanwhile, the fund's low exposure to food producer and mining stocks hurt returns as these sectors performed well during the quarter. Overall, the portfolio's structure remained unchanged over the quarter. The fund manager continued to seek out individual companies whose future potential is not being reflected by their share price, with a bias toward medium-sized companies. At sector level, the fund maintained a high exposure to cyclical-service stocks. At country level, the fund retained its overweight exposure to those countries with attractive economic growth prospects. The fund remained underweight core eurozone, notably France, as the manager found few compelling undervalued investment opportunities in this country.   Standard Bank European Growth comment - Dec 04 Thursday, 17 March 2005 Fund Manager Comment The fund benefited from successful stock selection, particularly within the banks, media and leisure sectors. The fund's holdings in a number of Central European banks, notably Turkish stocks, contributed to returns. In the media sector, the fund's exposure to TV broadcasting companies enhanced returns. In terms of leisure stocks, holdings in a Greek gaming company and a UK leasing-pub operator contributed to performance. In addition, the fund's lack of exposure to pharmaceutical stocks was beneficial as these companies were among the weakest sectors in Europe over the quarter. Meanwhile, the fund's bias towards medium-sized companies proved rewarding as this area of the market continued to outperform its larger counterparts. A number of telecommunication services stocks held in the fund hurt returns, notably selected Russian mobile operators.   Standard Bank European Growth comment - Sep 04 Monday, 29 November 2004 Fund Manager Comment During the third quarter, the fund returned -2.2% in euro terms, under-performing the benchmark index, which returned - 0.7% over the same period. While the fund performed well in September, relative returns suffered early in the period as a result of stock-specific factors in the insurance and food & drug retailers sector. In this respect, Swiss reinsurance company Converium announced that it did not have sufficient reserves in the US to meet its liabilities. This is likely to impact profits in the future and as a result, the fund manager disposed of the holding. In the food sector, Morrison issued a profit warning due to slow sales at its newly acquired Safeway stores. In addition, following the acquisition, management made some short-term changes to the business that were not well received by investors. However, the fund manager believes that the company still has significant long-term potential. Elsewhere, an overweight exposure to media stocks hurt relative returns during the quarter as the sector under-performed the broader market. On a positive note, a low exposure to the food producers & processors, and personal care & household products sectors - the worst-performing sectors during the quarter - benefited the fund. Meanwhile, individual holdings in the telecommunication services and automobiles & parts sectors aided returns.

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