Patience pays off - Ashburton's Perspective April 2012 by Ashburton Investments

April 2012

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What a difference a quarter makes!

Long-term perspective

What’s topical?

Be bold…

Latest news

Our latest fund performance figures as at 31 March 2012.

Ashburton’s MD, Peter Bourne, looks at the reasons to be optimistic.

We consider the key drivers of equity bull markets.

We get our regional equity managers talking.

Why it is now a prime time to invest in Europe.

Staff take on various sporting challenges for charity.

Patience pays off We consider the prospects for equity investing on both a short and long-term horizon.

www.ashburton.com A member of the FirstRand Group

Contents Contributors

Welcome Ashburton’s Managing Director, Peter Bourne, looks back on a positive quarter and explains why investors can be cautiously optimistic.

Tristan Hanson

Outlook Long-term perspective: what drives equity bull markets? By Tristan Hanson

With equities having risen so strongly from the lows, it is relevant to ask what drives equity bull markets and, based on that, whether we envisage a structural bull market ahead.

Regional Focus Questions & answers with Regional Fund Managers

Derry Pickford gathers insights from our regional fund managers on some of the factors affecting their investment outlooks.

European Equities Be greedy when others are fearful By Terry James

Investors generally remain fearful of Europe… yet arguably, there may never be another opportunity like now to invest in European markets, while valuations are at, or near, historical lows.

Performance Our latest fund performance figures as at 31 March 2012.

Contacts Details for our contacts in Jersey, South Africa and the UK.

Derry Pickford Derry joined Ashburton’s Asset Allocation team as Macro Analyst in December 2011 and has 12 years experience in the investment industry. Derry hold a BA(Hons) and MA(Hons) in Economics from the University of Cambridge (Clare College). He also holds the Investment Management Certificate (IMC).

Terry James

News Simon Finch runs the Tokyo marathon for charity and a team take part in the swimarathon. Plus, top decile performance for Ashburton’s European Equity Fund.

Tristan is Ashburton’s Head of Asset Allocation, with responsibility for Ashburton’s Multi Asset Funds, Total Return Bond Funds and related research. He holds a Masters in Public Administration in International Development (MPA/ID) from Harvard University’s Kennedy School of Government and the Securities and Investments Diploma.

Terry is a Business Development Manager with shared responsibility for driving Ashburton’s business development strategy in the UK market. Terry joined Ashburton in 2006 and has almost 30 years’ experience in financial services in the UK retail market. Terry is FPC qualified and holds the Investment Management Certificate.

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Welcome

What a difference a quarter makes! Of course, the first few months of last year

have led a shift towards outcome-based

dealt us a similar hand, only for those gains to

investment, while a lack of yield and increased

evaporate in pretty dramatic fashion over the

risk awareness amongst individuals and

year. However, there is no doubt that investor

advisers have also built strong appetite for this

sentiment has turned for the better, despite

product suite.

the many uncertainties that remain. While we know that markets do everything else but move

This trend resonates with us. 2012 marks

in a straight line, there certainly seems to be

Ashburton’s thirtieth anniversary. Over this

more room for optimism than more of the same

time, we have consistently applied the

gloomy scenarios we have grown used to over

principles of diversification, risk management

the past couple of years.

and active asset allocation across our evolving range of multi asset products. We constantly

“… While we know that markets do everything else but move in a straight line, there certainly seems to be more room for optimism …” At the start of this year, investors were generally hard pressed to find reasons to be optimistic; ninety days later, global equity markets are a good 12% higher with some of the more pressing threats seemingly off the table for now. In what has been a more conducive environment for investment, I am also pleased to report that Ashburton’s Funds have enjoyed positive returns across the board during this period.

challenge ourselves to improve our investment process and leverage our philosophy; in recent years we have embraced the influence of behavioural theory on markets and investors to reduce the level of emotion in decision-making and more easily recognise opportunities. In finishing, I would like to take the chance

What is perhaps not so clear for investors

to highlight the achievement of Simon Finch,

is in what geographies, which asset classes

a manager on our Asian desk, who recently

and where on the risk curve they should be

ran the Tokyo marathon in aid of charities

investing; is it in the safer, developed markets

in Jersey and in Japan. Simon was in

like the US stock market, which has had a

Japan shortly before the tsunami hit and

stellar performance recently, or in emerging

has been greatly moved by the fortitude of

markets, where lower and volatile returns can

the Japanese people in responding to this

often belie the perceived risk-reward payoff?

tragedy. We are very pleased that he finished

In today’s global world, is it better to buy

the race, his first marathon, in style and with

developing market profits through New York or

great support.

Shanghai listed companies? I do hope you will enjoy this edition Not surprisingly, investors are increasingly

of Perspective.

delegating these decisions to professional managers. Globally, multi asset sectors,

Regards

under a variety of names such as managed, balanced and target return funds, continue to attract sizeable investment flows. Other than the complexity of the global asset allocation

Peter Bourne

decision itself, ageing Western demographics

Managing Director

Long-term perspective:

what drives equity bull markets? Written by Tristan Hanson Head of Asset Allocation

9th March 2012 would not seem a significant date to most people, but it marks the three year anniversary of the post-Lehman low in global equity markets. Since that date, the MSCI World Index in local currency terms has returned 86%. Of course, the past 15 years has not been nearly so kind to equity investors, with the same index up around only 40% since 1997 (or 2.5% annualised growth). But the three year statistic does show just how far equity markets have come since the Lehman crisis, even if few investors were brave enough to commit fresh money at that point in time.

With equities having risen so strongly from the lows, it is relevant to ask what drives equity bull markets and, based on that, whether we envisage a structural bull market ahead. In our view, the main contributing factors to long-term equity bull markets are: (i) above trend profits growth; (ii) cheap starting-point valuations; (iii) low/stable or declining inflation expectations; and (iv) supportive monetary conditions. These broad conditions capture a number of more specific drivers. For example, government attitudes to corporate profitability or labour union bargaining power will have a significant bearing on profits growth attributable to shareholders, as will overall economic growth. Sentiment towards an asset class is, to a large extent, captured in valuation metrics. If everyone loves an asset (dot com stocks in 1999, for example) future fundamentals invariably fail to meet lofty expectations. Bull markets do not typically occur during periods of high inflation or deflation, but instead benefit from a decline in inflation to low single digit levels (say 1-4%). Supportive monetary conditions would include declining or low real interest rates and typically reasonable availability of credit (dysfunctional banking systems are not helpful). The experience of the US during the two decade-long bull run of the 1980s and 1990s provides a useful illustration. At the end of 1979, equity valuations were very depressed after a decade of lousy returns: the Shiller P/E ratio (a conservative measure) was only 9x. The Fed Funds rate was 14% and the US 10 year bond yield 10%. US inflation was running at 13%. Private sector debt as a share of GDP was 133% (excluding financials), compared to 250% today. As Howard Marks of Oaktree Capital remarked in a recent letter, in 1979 there was widespread aversion to equities, summed up in an article in Business Week entitled, â&#x20AC;&#x153;The Death of Equitiesâ&#x20AC;?. That pessimism on the US economy and corporate America sowed the seeds of an incredible bull market. The Fed conquered high inflation to achieve rates of 2-3% inflation, sending interest rates and bond yields substantially lower. Corporate profits rose faster than GDP growth, boosted by benign taxation, productivity growth, globalisation and declining labour bargaining power. Thus, by the turn of the millennium, US equities had delivered real annual returns of 12.8% over 20 years and

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...the main contributing factors to long-term equity bull markets are: (i) above trend profits growth; (ii) cheap starting-point valuations; (iii) low/stable or declining inflation expectations; and (iv) supportive monetary conditions. the Shiller P/E ratio was 44x. Unsurprisingly, the subsequent decade was very poor for investors.

If the above conclusions are correct, this poses a critical dilemma for individual investors: stay in supposedly ‘defensive’ assets (cash/ government bonds) and expect to lose money after inflation; or buy equities in hope of better returns than the past decade (which we expect) but accept substantial fluctuations in value.

Based on this analysis, can we look forward to a prolonged bull market in equities ahead? In our view, the long-term prospects for global equity returns are reasonably good, but not spectacular (which they were from the early 1980s). The most helpful factor currently is valuations, reflecting widely held concerns over the global economy. The current price-to-book value ratio for global equities is 1.76x compared to a 20 year average of 2.38x (source: Factset 02/04/2012), which suggests potential for an upward re-rating to boost returns if economic conditions do not deteriorate. It will be hard for companies, however, to achieve supernormal profits growth. Profit margins in much of the world are already elevated. The share of US GDP accruing to corporate profits is the highest it has been since 1950. By implication, it will be hard for profits to outpace GDP growth longer-term. Fiscal tightening in the OECD will also weigh on trend growth. As readers will know only too well, interest rates are already at very depressed levels, so there is little potential for declining real rates to support markets on a multi-year view. Moreover, credit conditions are constrained by financial sector deleveraging, particularly in Europe. Overall, therefore, we expect global equity markets to deliver reasonable returns over the coming decade, as investors are not currently over-paying for corporate profitability. Moreover, in our view, the outlook for equities is vastly superior to developed market government bonds, which, at the current depressed yields, will likely deliver dramatically lower returns in future (negative after inflation, we anticipate). Corporate bonds should deliver moderately better returns than government bonds, but lower returns than equities. Within fixed income markets, our preference remains for corporate and selective emerging market bonds.

We believe a third alternative exists in the form of actively managed multi asset funds. While there will always be some asset class that outperforms a diversified fund during a given period, over the long-run we believe a well-managed multi asset fund can deliver attractive risk-adjusted returns. Such funds also take the asset allocation decision out of the investor’s hands and avoid the age-old risk of placing all of one’s eggs in a single basket. We believe the consistent performance of our Asset Management Portfolios and Funds over the past 30 years are testament to the validity of multi asset investing and Ashburton’s capabilities in this area.

10 years of asset returns 90

-30 2002

2003

2004

2005

2006

2007

2008

2009

2010

Ashburton Replica Sterling Asset Mgt

MSCI World Hdg GBP

BBA Libor 1 Month GBP

JPM GBI Global TR Hdg GBP

Source: Morningstar Direct as at 31/03/2012.

2011

2012

Regional Focus Derry Pickford asks our regional fund managers for their insights on some of the factors influencing the investment outlook currently.

Q&A US Equities, Nick Skiming We saw poor personal spending data in January and February. Is this showing up in your consumer names? You would be forgiven for thinking that lighter spending data in the US would have adversely impacted consumer stocks. However, investors have overlooked this as the mere whiff of a modest improvement in employment and construction data has led to a dramatic rebound in a number of consumer sub-sectors. These have been led by homebuilding groups and household appliances, although home improvement

Q&A Japan Equities, Simon Finch Competition, particularly from Chinese and Korean companies, has been a worry for Japanese companies in light of the record strength of the yen. Are you concerned that Japanese industrials will be left behind by their Asian neighbours in the battle to secure production orders? Recent figures show that corporate Japan has sliced a further 6.5% off their breakeven ratio in 2011, on top of the 12-13% reduction since Lehman Brothers collapsed. With companies becoming more operationally geared, this should strengthen their competitiveness at a time when the yen has reversed the gains of 2011. We would encourage investors to pay closer attention to Japanese industrial fundamentals which are more appealing than some of their Chinese counterparts for instance.

and furnishings have also participated. The overall consumer discretionary sector has, in fact, been amongst the leading groups over the quarter. Beyond this, there has been some discrepancy between some areas sensitive to a modest economic uplift and those companies offering a relatively direct luxury shopping experience. For example, the earnings of Lululemon or upmarket leather goods group Coach - both names we own currently - have been seemingly immune to the relatively subdued consumer, whilst large department stores, which provide a more diverse sales offering are only seeing, and are expected to report, modest earnings growth. What does Apple’s change in cash policy mean for its shareholders? The technology sector, which is viewed as a growth sector, has a history of reinvesting earnings back into the company rather than taking the less tax efficient route of paying them to shareholders

via dividends. So, does this signal that Apple has run out of growth prospects? Far from it, the problem they face would be an enviable problem for any company. They still have an internal return on capital metrics that make the eyes water, but so do their cash flow numbers. Since they focus their R&D on a small number of products, their spend in this area is below the industry average as a percentage of revenue. The other issue with their cash hoard (circa $100bn) is that most of it is held abroad and to bring it back to the USA would incur a large tax hit, which is why they structured this change in policy to reward shareholders from their domestic cash holdings. Their change is not a sign of weaker growth prospects, but as a result of their phenomenal success. The dividend should attract a new investor base and the effect of the buyback will be to sterilise the dilution from employee stock options. Overall, this should be seen as a big positive for the company.

The recent announcement from the Bank of Japan (BoJ) has led to yen weakness, which should further assist Japanese industrials and exporters. And do not forget, Japanese industrials are yielding an average of close to 3.5%, which is ahead of their global peers. Is the Bank of Japan now serious about ending deflation? The change of tone from the BoJ’s announcement in mid-February gave rise to a growing sense that the BoJ really was committed to hitting its inflation “goal” of 1%, rather than being satisfied to wallow closer to 0%. The additions to the Asset Purchase Programme of Y10tn, coupled with inflation targeting, could at least begin to show that their words are more than just that. We have been hearing that more corporates have begun to increase wages, which has not been evident for a prolonged period. In our opinion, the reappearance of inflation in Japan would be a strong positive (albeit mild inflation not stagflation). After nearly two decades of deflation this single development would, we believe, fundamentally alter the view of Japan.

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Q&A European Equities, Alan Le Maistre

How severe a recession is priced into European equities? Despite the strong start to the year, European valuations look far from stretched, with the EuroStoxx trading on 8.7x next year’s earnings and discounting a mild H1 2012 recession for the Euro zone. Whilst the sovereign debt crisis uncertainty persists, we continue to favour European companies with high revenue and earnings exposure outside of Europe, which trade on a favourable “European” discount to their US and Asian counterparts. You’ve now gone underweight European financials, what headwinds do you foresee? Whilst bank shares have recovered as the risks of an imminent funding crunch have been reduced, we still see much cause for concern in the sector and remain underweight. The peripheral sovereign debt crisis is far from over, and non-performing loans for the private sector are likely to increase. Despite low valuations, we see greater visibility and better risk-reward in other cyclical sectors.

Q&A Asia Equities, Craig Farley What will a soft landing mean for commodity prices? In our view, GDP growth of at least 7.5% for 2012 would constitute a ‘soft landing’ scenario for China. We expect a stronger second half as the lagged effects from monetary tightening in 2011 dissipate and as policy is selectively eased. Fixed asset investment, the growth engine of the past decade, will likely grow in the region of 2122%, providing underlying support to the economy. The net result in the short-term is likely to be higher commodity prices as the country’s growth momentum accelerates

With labour costs rising in China, does this present an opportunity for Europe? Undoubtedly, increased labour costs, coupled with raw material and energy inflation, are influencing emerging market industry and accelerating the drive to automation. Chinese manufacturers still rely heavily on manual labour. For example, 80% of welding in a domestic Chinese automotive plant might be manual, whereas in a modern European plant this is almost entirely automated (over 95%). Niche European industrial companies offer leading technologies (robotics, hydraulic presses, fibre optic laser welders etc.) to increase the efficiency and automation of production, technologies which have driven the success of the domestic European auto market. Many of these companies have high exposure to the emerging markets and sales to those regions are at all time highs: Duerr, for example, has 80% market share in China and 66% globally.

into year end. That said, our base case over the medium to long-term is lower prices, predicated on; 1) increased supply attracted by higher prices and 2) an underlying structural shift in the Chinese growth dynamic as the country’s reliance on exports shifts towards domestic consumption. Meanwhile, a considered policy objective away from hard infrastructure towards soft infrastructure and the environment is also taking shape. The net result will be a reduction in medium to long-term commodities demand relative to GDP growth, and we anticipate that bulls overestimating commodity demand from urbanisation for this decade will have to trim estimates accordingly.

issue of local government debt defaults

Is China’s local government debt issue a ticking time bomb? How will trust products that own some of the loans perform?

lies with private lending to property developers,

In reality, one should consider all local government debt as being held by the central government. Beijing has been tackling the

using two directives. First, by allowing the maturing debt to be rolled over and second, by encouraging local government financing vehicles to use a variety of tools (issuing local government bonds, privatisation of projects, introduction of additional taxes) to raise additional funds. This reduces default risk and improves the ability of local governments to service the debt. The bottom line is that Beijing will take care of local government loans, but it may be a bumpy ride along the way for local officials who made them and investors who participated. As for trust products, the crux of the problem especially in 2011 when credit tightening prevailed. Over the past quarter, an alleviation of concerns over the European debt crisis has eased international liquidity, allowing listed developers to raise equity and/or bond funds to repay trust product-related debt. Aggressive price cuts on projects have also been

Beijing has been tackling the issue of local government debt defaults using two directives. First, by allowing the maturing debt to be rolled over and second, by encouraging local government financing vehicles to use a variety of tools (issuing local government bonds, privatisation of projects, introduction of additional taxes) to raise additional funds.

administered to drive sales activity. Therefore, whilst it is difficult to assess performance directly, some trust products will likely have performed poorly over the past 18 months, but should improve as property restrictions are selectively eased going forward. Also, bear in mind that trust loans represent less than 5% of total loans in the banking system.

Be greedy

when others are fearful Everyone has their favourite saying or traditional adage from stock market folklore, but in our emotionally-charged world of investment, Warren Buffet’s immortal words “be fearful when others are greedy and greedy when others are fearful” often spring to mind.

Written by Terry James Business Development Manager

Arguably, investors may never get another opportunity like now to invest in European markets, while valuations are at, or near, historical lows. This year’s Equity Gilt study from Barclays Capital highlighted the potential attraction of European equities compared to other developed world markets, with the price earnings ratio for Germany at 9.5x compared to 10.6x for the UK, 13.23x for the US and 13.7x for Japan. However, in a recent Hot Topic ‘After the Deal’, Ashburton’s Head of Asset Allocation Tristan Hanson warned “it goes without saying that the crisis in Europe is a long way from being over.” This explains why investors generally remain fearful of Europe, with most portfolios significantly underweight. Yet Ashburton’s thematically-driven approach to Europe seeks to take advantage of an unprecedented potential opportunity on a medium to long-term horizon, regardless of what happens in the short-term. The “gorilla” or macro themes currently deployed by European manager Richard Robinson and co-manager Alan Le Maistre are ‘Death of Cheap Oil Supply’, ‘Billion Boomers’, ‘Recovering West’, and ‘Austerity Busters’. These offer an attractive opportunity to invest in top quality European companies, particularly those generating a large percentage of their earnings outside of Europe and which are therefore less susceptible to sovereign debt related setbacks. These stocks are beneficiaries of global rather than pure European growth, yet have failed to keep pace with their US and Asian counterparts (in valuation terms), as investors indiscriminately turned their backs on all things European.

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... Ashburton’s thematicallydriven approach to Europe seeks to take advantage of an unprecedented potential opportunity on a medium to long-term horizon, regardless of what happens in the short-term. The Oil theme represents a significant portion of the Fund, perhaps surprising to investors who are concerned that Brent crude currently trades around $124 a barrel, which in Euro terms is an all time high. The resulting increase in energy costs is negatively impacting European industry, but which provides investment opportunities in companies increasing the automation and efficiency of industry, where our exposure is currently around 10%. However, what really excites Richard and his team is not the price of oil, but what is driving it higher. Whilst the current price certainly includes a risk premium for lost Middle East and North African production as well as political tensions in Iran, it is the ever increasing supply/demand imbalance that is elevating prices. In the longer-term, demand is likely to grow, especially as Western governments do not have the cash in the foreseeable future to subsidise alternative strategies like wind and solar, nor the risk appetite to expand nuclear energy following the Japan tragedy. In emerging markets, expected oil demand growth is even greater. More importantly, the Ashburton view is predicated on supply constraints (often overlooked by economists in favour of demand) and the need to unlock new reserves. The level of current demand is rapidly eating into current reserves, which is clearly unsustainable. More wells have to be drilled, in more challenging conditions, in deeper water and further underground. Consequently, the expertise of the Norwegian oil service companies, market leaders in

deep water and harsh environments is very important, as evidenced by the demand for their knowhow in the Gulf of Mexico following the Macondo disaster. This sector has high barriers to entry and is highly profitable in the current environment.

top down identification of sector and industry themes within Europe that benefit from global rather than regional drivers. ’Billion Boomers’ is, for example, a play on companies benefiting from emerging consumer growth. Although this approach can lead to some heighted volatility in returns at times, the reward profile has been equally high, as evidenced by the European Fund’s long term track record.

This is one of several exciting themes the Ashburton European equity team has been investing in to great success over a number of years. While space restricts us from exploring some of the other themes in this article, the philosophy and approach is very similar; the

To reiterate, there has probably never been a better time when looking at Europe to “be greedy while others are fearful”.

Ashburton European Equity Fund Vs MSCI Europe - Over ten years

120

100

-20

-40 2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

-60

European Equity Fund € PC

MSCI Europe GR USD

Source: Morningstar Direct. 31/03/2002 to 31/03/2012. Performance calculated on a bid to bid price basis which ignores the effect of initial charges, together with income reinvested.

2012

News Japan Fund Manager, Simon Finch runs Tokyo marathon for charity On 26th February, Simon took on the challenge of running his first marathon in aid of two very worthwhile charities. Firstly, for the Sundeep Watts Memorial Fund, which raises money for a number of excellent educational projects in some of the poorest regions in Africa, and secondly to raise money for the relief efforts in Japan following the devastating earthquake in March 2011 which left tens of thousands without homes. Through a committed fund raising effort Simon raised £4140.00, more than double his target, and completed the race in an impressive 3 hours and 36 minutes. Congratulations to Simon!

Ashburton takes to the water

European Fund hits top decile

A team of 7 swimmers took part in the annual Lion’s Club of Jersey Swimarathon in March.

Our European Equity Fund is currently ranked in the top 10% of its peer group for YTD, 3, 5, 10, & 15 year time frames.

A strong team effort, spurred on by some enthusiastic poolside cheering, saw them give the best performance of their session by clocking up 140 lengths. Money raised from a staff dress down day went towards the sponsorship donation.

Richard Robinson has also been awarded an ‘A’ rating by Citywire for his exceptional track record as a Fund Manager on a risk-adjusted basis.

TOP DECILE RANKING

YTD

3 years

5 years

10 years

15 years

Ashburton European Equity Fund

1st

Source: Morningstar Direct as at 31/03/2012.

Performance

| 10 | 11 |

as at 31 March 2012

YTD

1 year

3 year

5 year

10 year

Since Launch

Launch Date

Yield (%)

Sterling Asset Management - Accumulating*

4.88

3.38

26.42

23.19

62.25

252.22

04/02/92

n/a

Sector Average

4.61

1.16

42.44

9.59

52.32

296.73

Sterling Asset Management - Distributing*

4.59

4.09

27.06

23.60

62.27

277.73

01/01/92

0.87

Sector Average

4.61

1.16

42.44

9.59

52.32

303.56

Dollar Asset Management - Accumulating*

4.93

2.31

28.32

16.23

61.74

211.37

04/02/92

n/a

Sector Average

6.61

-0.94

41.44

7.97

56.83

181.56

Euro Asset Management - Accumulating*

4.65

4.53

29.95

16.88

51.61

25/04/03

n/a

Sector Average

4.77

-0.75

22.19

-5.58

32.46

Euro Asset Management - Distributing*

4.35

5.00

30.42

15.58

40.07

03/12/01

1.23

Sector Average

4.77

-0.75

22.19

-5.58

13.53

Multi Asset Cautious Fund GBP

2.84

1.81

19.09

12.67

17.11

19/06/06

0.85

Sector Average

3.21

3.19

37.10

9.99

17.29

Multi Asset Balanced Fund GBP

3.72

0.09

29.67

15.38

21.47

19/06/06

0.29

Sector Average

4.61

1.16

42.44

9.59

20.39

Multi Asset Balanced Fund USD

4.29

-0.16

32.83

11.26

23.34

19/06/06

0.64

Sector Average

6.61

-0.94

41.44

7.97

21.61

Multi Asset Balanced Fund EUR

3.59

1.28

32.81

3.94

18/02/08

0.19

Sector Average

4.77

-0.75

22.19

-1.14

Multi Asset Aggressive Fund GBP

6.25

-1.75

36.60

10.40

12.48

19/06/06

0.25

Sector Average

6.51

0.15

42.92

9.41

21.61

nil

% Growth Multi Asset Funds

Equity Funds 8.15

-4.05

32.62

-3.66

16.90

296.17

01/01/92

MSCI World TR USD

-8.66

1.47

58.54

21.95

48.93

345.17

Global Dollar International Equity Fund PC

11.93

-5.54

47.59

-15.14

39.32

2.11

06/04/00

nil

MSCI World TR USD

11.72

1.14

76.73

-0.66

67.10

20.67

Americas Equity Fund PC

14.16

2.83

79.90

9.45

39.64

106.16

06/01/97

nil

MSCI North America TR USD

12.26

6.35

88.12

12.08

56.98

157.84

Japan Equity Fund PC

10.50

-0.08

16.99

01/12/09

nil

MSCI Japan TR USD

11.35

0.42

11.31

Chindia Equity Fund

8.72

-24.26

53.11

-13.63

-9.60

01/12/06

nil

Chindia Benchmark

16.12

-14.23

80.82

23.94

26.18

European Equity Fund PC

15.58

-0.64

76.20

-6.41

60.95

234.18

06/01/97

nil

8.02

-0.83

65.22

-15.89

17.13

130.35

Americas Equity Fund - £ Feeder PC

9.23

2.89

58.61

29.36

30.08

01/12/06

nil

Japan Equity Fund - £ Feeder PC

6.53

0.78

20.68

01/12/09

nil

Chindia Equity Fund - £ Feeder PC

4.63

-23.55

35.99

4.53

9.89

01/12/06

nil

15.86

-5.63

57.89

14.33

27.53

01/12/06

nil

Sterling Total Return Bond Fund PC

1.52

5.73

5.74

23/9/10

2.18

JP Morgan Global GBI Hedged GBP TR

0.42

7.60

4.99

Dollar Total Return Bond Fund PC

1.59

5.08

5.31

23/9/10

1.84

JP Morgan Global GBI Hedged USD TR

0.35

7.17

4.45

Sterling Money Market Fund

0.10

0.34

1.64

10.97

31.57

25/10/02

0.25

Dollar Money Market Fund

0.00

0.57

5.77

17.09

25/10/02

0.01

Euro Money Market Fund

0.09

0.71

1.40

8.31

18.06

25/10/02

0.14

Global Sterling International Equity Fund PC

MSCI Europe TR USD Feeder Funds

European Equity Fund - £ Feeder PC Fixed Income Funds

Money Market Funds

Source: Morningstar Direct as at 31/03/2012. NB: As from January 2011, all Ashburton Fund benchmark performance is calculated using a Total Return (TR) rather than a Capital Return (CR) basis, bringing it into line with industry standards. FOR PROFESSIONAL ADVISERS ONLY. Issued by Ashburton (Jersey) Limited. Registered Office 17 Hilary Street, St Helier, Jersey JE4 8SJ, Channel Islands. Regulated by the Jersey Financial Services Commission. Figures are calculated on a bid to bid price basis, ignoring initial charge, with gross income reinvested. The value of investments, and the income from them, can go down as well as up, is not guaranteed, and you could receive back less than you invested. This could also happen as a result of changes in the rate of currency exchange, particularly where overseas securities are held. Past performance is not necessarily a guide to future performance. If you undertake investment business with a non-UK firm, you will be excluded from the benefit of the rules and regulations made under the UK’s Financial Services and Markets Act 2000, including the UK Financial Services Compensation Scheme. Approved for issue in the UK by FirstRand Bank Limited (London Branch) whose Registered office is at 20 Gracechurch Street, London EC3V 0BG and which is authorised and regulated by the UK Financial Services Authority.

Global Contacts JERSEY

SOUTH AFRICA

Ashburton (Jersey) Limited PO Box 239 17 Hilary Street St Helier Jersey JE4 8SJ

Johannesburg Ground Floor 5 Merchant Place 9 Fredman Drive Sandton 2146 South Africa

Durban Block C Torino Court 4 Crooked Lane Hillcrest 3610 South Africa

David Christie Direct dial: +27 (0)11 245 5039 Email: david.christie@ashburton.co.za

Debbie Miskin Direct dial: +27 (0)31 560 7860 Email: debbie.miskin@ashburton.co.za

Gavin Fraser Direct dial: +44 (0)1534 512234 Email: gavin.fraser@ashburton.com Tom Zambon Direct dial: +44 (0)1534 512010 Email: tom.zambon@ashburton.com Kellie Christian Direct dial: +44 (0)1534 512118 Email: kellie.christian@ashburton.com

Claire Davies Direct dial: +27 (0)11 245 5057 Email: claire.davies@ashburton.co.za Eloise Trewin Direct dial: +27 (0)11 245 5040 Email: eloise.trewin@ashburton.co.za

London 5th floor 20 Gracechurch Street London EC3V 0BG United Kingdom

Cape Town The Pavilion 155 Campground Road Newlands 7700 South Africa

Terry James Direct dial: +44 (0)207 939 1803 Email: terry.james@ashburton.com

Adam Benzimra Direct dial: +27 (0)21 673 3502 Email: adam.benzimra@ashburton.co.za

Issued by Ashburton (Jersey) Limited. Registered Office 17 Hilary Street, St Helier, Jersey JE4 8SJ, Channel Islands. The views expressed in this document represent the collective views of the Ashburton investment team and its external advisers, which will change with altering market conditions and may not necessarily be reflected in the composition of portfolios managed by Ashburton. The value of investments, and the income from them, can go down as well as up, is not guaranteed, and you could receive back less than you invested. This could also happen as a result of changes in the rate of currency exchange, particularly where overseas securities are held. Past performance is not necessarily a guide to future performance. Ashburton (Jersey) Limited and Ashburton Fund Managers Limited are regulated by the Jersey Financial Services Commission. Ashburton (Jersey) Limited is also registered as a Foreign Investment Services Provider in South Africa in accordance with Section 8 of the Financial Advisory & Intermediary Services Act 2002. If you undertake investment business with a non-UK firm, you will be excluded from the benefit of the rules and regulations made under the UKâ&#x20AC;&#x2122;s Financial Services and Markets Act 2000, including the UK Financial Services Compensation Scheme. Approved for issue in the UK by FirstRand Bank Limited (London Branch) whose Registered office is at 20 Gracechurch Street, London EC3V 0BG and which is authorised and regulated by the UK Financial Services Authority.