Global Equity Fund Commentary

Market Overview

Many global stock markets turned in strong gains in the first quarter, led by Japan which rose 20%. Several other Asian markets recorded double-digit gains and the U.S. had a strong start to the year. European markets also advanced, with Germany at the top of the pack.
The loonie rose 9% against the yen, which dampened returns for Japanese holdings, but was little changed against the U.S. dollar and Euro.

Portfolio Specifics

As the panic surrounding debt issues in Europe abated, many stocks in the region rebounded. More specifically, the fund’s German holdings gained strong ground (SAP and Deutsche Post) and financial companies rallied (Royal Bank of Scotland, HSBC, Aviva).
The portfolio’s U.S. investments were the strongest contributors to performance. Tech companies such as Microsoft, Applied Materials and Intel were up strongly along with homebuilder DR Horton.
Japanese stocks also saw a turnaround, as the earnings recovery became more evident and the yen weakened (a positive for exporters). Mitsubishi, Sony, Japan Tobacco and Ricoh all gained over 20%.
Exposure to the emerging markets, where over 35% of the fund’s revenues are generated, remains an important theme.
There is little to report on the negative side. Tesco was one of few holdings to lose ground, while telecom and health care holdings saw limited gains.

Notable Transactions

Four companies were purchased: Rio Tinto (Anglo-Australian miner); ABB (Swiss leader in power technologies); Johnson Controls (U.S. auto parts company); and Sandisk (U.S. manufacturer of flash memory cards).
Five stocks were sold: Intel, Diageo, and Shell based on strong performance; General Dynamics on a murky outlook; and Tesco on operational issues.

Positioning

The manager (Edinburgh Partners Limited) continues to focus on companies with sensible growth outlooks and avoid those that are operating at peak, possibly unsustainable, margins. They continue to find value in the technology and consumer-related sectors.
EPL is finding better opportunities in Europe and Asia than in the U.S. This is reflected in the fund’s geographic profile: roughly 40% of the portfolio is invested in Greater Europe, 40% in Greater Asia, and 20% in the Americas.
The portfolio has taken on a little more exposure to cyclical businesses (economically sensitive) where growth targets are achievable.