Europe citywire retreat may 2013

For professional adviser use only | www.sandwfunds.com

Smith & Williamson European Growth Trust

Mark Pignatelli Citywire

Private Client Manager Retreat

16th –

17th May 2013


2

About Smith & Williamson

•

Smith & Williamson Group

Founded in 1881

An independently owned professional and financial services group

Private company, c.70% of equity mainly held by Directors and staff

Employs circa 1,450 staff in offices across the UK and Ireland

•

Smith & Williamson Investment Management

Privately-owned Limited Liability Partnership with over £14.0 billion of assets under management*

Over 170 investment managers

Winner of the 2010, 2011 and 2012 Citywire

Wealth Manager investment performance award for Best Large Firm

Investment offices in London, Glasgow, Bristol, Birmingham, Dublin and Belfast.

*AUM as at 31.03.13


3

The European team

Mark PignatelliMark joined Smith & Williamson in 2008 to manage the Smith & Williamson European Growth Trust. Having begun his investment career at Baring Asset Management in 1987, Mark became Head of the European Investment Team in 1995. In 2000, Mark moved to Schroder Investment Management as Head of Europe and subsequently Chief Investment Officer. In 2004, Mark left Schroders

to establish Remus

Capital LLP. Mark has a degree in Economics and Economic History from the LSE.

Michael PascallMichael joined Smith & Williamson in September 2009 to assist Mark Pignatelli on the Smith & Williamson European Growth Trust. He began his investment career at Schroder Investment Management in 1998, as a member of

the European Team. In 2002 he joined the Investment Process Resource

Unit at Schroders

as a quantitative analyst where he helped to establish the unit’s two market neutral products. Michael subsequently joined Remus

Capital in April 2005. He has a degree in Mathematics from the University of Leicester.

£35.4 million assets in the Smith & Williamson European Growth Trust*£84.8 million total assets under the team’s management** *as at 08.05.13.**as at 08.05.13.


4

Performance

Name

% Growth

YTD

To 08.05.2013

Calendar year

2012

Calendar year

2011

Calendar year

2010

Calendar year

2009

Value Rank Quartile Value Rank Quartile Value Rank Quartile Value Rank Quartile Value Rank Quartile

Smith & Williamson European Growth Trust

12.17 95 4 26.24 6 1 -23.71 106 4 14.58 18 1 23.73 21 1

FTSE Europe ex UK

(Total Return GBP)

15.80 17.82 -14.71 5.75 20.09

Total Median 14.93 100 100 18.70 104 104 -15.97 (108) 7.25 (107) 19.19 (100)

*Source Morningstar. mid-mid. Total return. Net income reinvested, Base currency GBPFTSE International Limited (“FTSE”) ©

FTSE 2013. FTSE®

is a trademark of London Stock Exchange Plc and The Financial Times Limited and is used by FTSE

under licence. All rights in the FTSE Indices vest in FTSE and/or its licensors. Neither FTSE

not its licensors accept any liability for any errors or omissions in the FTSE Indices or underlying data. No further distribution of FTSE Data is permitted without FTSE’s

express written consent


5

Fund proposition

•

The Fund is a multi-cap fund investing for growth in continental European equities

•

The Fund has two elements to it:

40-50% is invested in around 20 of the top 60 companies by market capitalisation –

this gives the fund a large-cap ‘anchor’

50-60% is invested on a bottom-up basis in around 40-50 of the best

stock ideas irrespective of market capitalisation and geography


6

Stock selection philosophy

Five key criteria for stock selection:

1) High Quality Returns

(i.e. an ability to self-finance growth)

2) Attractive Valuation3) Sound Management Strategy4) Growing Footprint

(either industry or company specific)

5) Positive Earnings Surprise

1, 2 & 5 : using Quantitative screening 3

& 4 : using Qualitative fundamental analysis


7

•

Disciplined process screening 1,600 stocks via 10 screens•

Designed to capture characteristics of value, high quality returns & earnings revisions

Stock selection process –

quantitative overlay applied to all stocks

Source: Bloomberg, Smith & Williamson Investment Management as at 08.0513

Coppock 144 Spread Name Total Market Cap Value Revisions Growth Quality Country Sector Beta62.32 19% Banca

Ifis 1 428 4 6 3 5 Italy Financials 0.60-2.02 13% Valeo 1 3752 4 6 19 22 France Industrials 1.3195.29 14% Leroy Seafood Group 1 1305 11 6 1 17 Norway Consumer Staples 0.3634.65 23% Grammer 1 287 10 14 12 21 Germany Industrials 1.78-19.12 -6% Sto

Pref. 1 752 24 7 4 16 Germany Industrials 0.4221.83 11% Koenig & Bauer 1 295 6 8 2 63 Germany Industrials -0.0315.38 12% Eltek

Asa 1 239 14 1 2 61 Norway Industrials 0.11-8.65 13% Pharmstandard

OJSC 1 1966 7 7 16 24 Russia Pharma

Health 0.32225.19 49% Norwegian Air Shuttle 1 1357 14 1 22 11 Norway Consumer Cyclicals 0.685.21 0% Block Watne

Gruppen 1 249 5 4 10 44 Norway Consumer Cyclicals 0.07-5.10 4% Joyou 1 262 3 3 13 44 Germany Consumer Cyclicals -0.40-26.62 -3% Uzin

Utz 1 104 22 1 10 36 Germany Commodities 0.2315.02 9% SAF-Holland 1 299 17 18 6 24 Germany Industrials 1.3423.67 5% Borussia

Dortmund 1 201 5 11 21 19 Germany Consumer Cyclicals 0.2411.80 -10% Deutsche Beteiligungs 1 258 8 8 17 32 Germany Financials 0.59-4.38 0% Sberbank

of Russia 1 57613 17 15 14 5 Russia Financials 0.98-1.38 1% Centrotec

Sustainable 1 270 17 18 10 24 Germany Industrials 0.728.79 12% Total Gabon 1 2126 1 3 38 22 France Energy 0.45

-26.57 -16% TMK OAO 1 1918 2 27 24 16 Russia Commodities 0.84-47.56 -18% Anglo Pacific Group PLC 1 294 30 1 6 47 United Kingdom Commodities 0.1413.27 15% R Stahl 1 227 34 13 8 5 Germany Industrials 0.2726.30 7% Homag

Group 1 222 19 19 5 36 Germany Industrials 0.3177.86 10% Vueling

Airlines 2 268 9 25 11 13 Spain Consumer Cyclicals 0.08-28.96 4% Cramo

Oyj 2 440 9 11 3 90 Finland Industrials 1.3936.01 17% Brembo 2 854 20 18 13 29 Italy Industrials 1.20


8

XYZ –

additional screening process

Source: Bloomberg, Smith & Williamson Investment Management as at 08.05.13

Real EBITDA % Theoretical Theoretical CurrentName Value Revisions Total X Y Z1 Z2 Z3 Cap Emp Real CE Upside EV Net Debt Mkt

Cap Mkt

CapLEROY SEAFOOD GROUP 11 6 1 11% 8% 18% 23% 11% 5,756 0.33 13.1% 12,814 1,644 11,170 9,879CERMAQ 17 16 3 9% 6% 15% 18% 11% 6,477 0.27 -3.8% 12,086 2,474 9,612 9,990BARON DE LEY 21 16 3 -3% 8% 5% 5% 5% 158 0.21 12.7% 226 -57 283 251WESSANEN KON.CERTS. 13 6 3 -3% 7% 4% 4% 5% 225 0.19 15.7% 285 34 250 217TRIBAL GROUP 41 2 4 74% 6% 80% 6% 9% 31 0.00 -105.4% 0 8 -8 142GENERALE DE SANTE 21 1 6 -7% 17% 10% 11% 13% 1,310 0.19 50.2% 1,711 769 941 627DELHAIZE GROUP 10 4 8 2% 6% 9% 9% 8% 5,862 0.24 60.5% 9,778 1,787 7,991 4,979FYFFES (ESM) 5 15 10 5% 9% 14% 16% 13% 122 0.30 32.7% 252 -20 272 205RECKITT BENCKISER GROUP 68 3 11 5% 6% 11% 29% 6% 2,768 1.04 -45.5% 19,573 1,432 18,141 33,285SAINSBURY (J) 20 10 12 5% 2% 7% 10% 7% 4,120 0.35 7.1% 9,938 2,210 7,728 7,217ROYAL UNIBREW 45 28 12 1% 7% 7% 8% 7% 1,347 0.47 -32.4% 4,274 486 3,788 5,602SAS 1 27 14 0% 14% 14% 14% 14% 18,131 0.20 269.2% 24,220 6,910 17,309 4,688DISTRIBUIDORA INTNAC.DE ALIMENTACION56 8 17 6% 4% 10% 14% 9% 1,749 0.38 -3.9% 4,552 477 4,074 4,239CRANSWICK 38 7 18 8% 5% 13% 17% 9% 199 0.35 -11.0% 480 14 467 524TESCO 19 30 21 6% 3% 10% 14% 9% 14,983 0.35 1.6% 36,125 5,379 30,745 30,262SLIGRO FOOD GROUP 36 18 24 1% 6% 7% 7% 7% 649 0.24 -9.0% 1,050 23 1,027 1,128AXFOOD 46 21 26 22% 4% 26% 42% 13% 5,145 0.38 -12.7% 13,301 178 13,123 15,037BONGRAIN 3 57 27 2% 6% 8% 7% 7% 1,784 0.16 126.4% 1,905 288 1,617 714CASINO GUICHARD-P 30 26 27 8% 0% 7% 10% 2% 11,613 0.30 80.6% 23,666 6,527 17,139 9,490KWS SAAT (XET) 72 12 29 13% 3% 16% 21% 12% 651 0.29 -22.4% 1,307 -121 1,427 1,839BARR (AG) 88 9 29 10% 4% 14% 22% 8% 117 0.41 -51.2% 325 9 316 648BRITISH AMERICAN TOBACCO58 26 30 11% 6% 16% 83% 8% 4,233 1.59 -47.5% 46,020 8,948 37,072 70,608SUEDZUCKER (XET) 18 38 31 4% 5% 9% 10% 8% 4,589 0.26 21.3% 8,017 562 7,456 6,145MARR 34 24 32 7% 6% 13% 17% 8% 279 0.34 -26.2% 640 173 467 632MORRISON(WM)SPMKTS. 28 25 32 7% 1% 8% 17% 8% 2,697 0.49 -7.8% 8,928 2,582 6,347 6,887C&C GROUP 60 22 34 10% 6% 15% 30% 8% 295 0.56 -34.7% 1,117 59 1,058 1,619TOTAL PRODUCE (ESM) 4 36 40 -3% 10% 8% 7% 9% 203 0.30 51.7% 409 63 345 228PINGUINLUTOSA 31 36 40 -11% 16% 5% 9% 9% 364 0.14 87.5% 358 -43 401 214ASSOCIATED BRIT.FOODS 76 5 41 6% 3% 9% 11% 7% 5,942 0.28 -31.9% 11,447 735 10,712 15,723HYDER CONSULTING 7 61 42 7% 8% 15% 15% 9% 133 0.23 39.2% 210 -28 237 171

Screen Scores


9

Stock selection process –

qualitative review of screened stocks

Company meetings**

Conferences

Analyst meetings*

Qualitative stock

assessment process

•

Management is very important (i.e. business plans)•

Macro oversight -

industry dynamics assessed

*In the last twelve months Mark has attended circa 150 analyst meetings

** In the last twelve months Mark has attended over 200 company meetings


10

Portfolio construction

Invested only in some of the top 60 indexed companies in Europe

Any stock irrespective of size, sector or country

c.50-60% currently 59%*

Portfolio

c.40-50% currently 41%*

*Data as at 08.05.13


11

Top ten top-down holdings

Stock name

Country

% weight in Fund

1.

Novartis

Switzerland 4.4%2.

Danske

Bank Denmark 3.3%

3.

Credit Suisse Group

Switzerland 3.3%4.

AXA

France

3.2%

5.

BNP Paribas France

3.2%6.

BBVA

Spain 3.2%

7.

Societe

General France

3.1%8.

Credit Agricole

France

3.0%

9.

ING Groep

Netherlands

2.8%10.

Volkswagen

Germany

2.7%

Source: Smith & Williamson Investment Management, Bloomberg, as at 08.05.13


12

Top ten active bottom-up holdings

Stock name

Country

% weight in Fund

1.

Danske

Bank

Denmark 3.3%2.

Credit Agricole

France

3.0%

3.

Delhaize Group Belgium

2.3%4.

Smurfit Kappa Group Ireland

2.1%

5.

Lottomatica

Group Italy

1.9%6.

Bertrandt

Germany

1.9%

7.

Stora

Enso

Finland

1.9%8.

Ascom

Holding Switzerland 1.9%

9.

KBC Groep

Belgium

1.9%10.

Wincor Nixdorf Germany

1.8%

Source: Smith & Williamson Investment Management, Bloomberg, as at 08.05.131


13

Four issues

1.

Liquidity

2.

Valuation

3.

Growth

4.

Eurozone

crisis


Liquidity


15

Liquidity boom

Source: Smith & Williamson Investment Management, Datastream

as at 13.03.13

Euro Stoxx

Price to Book (inverted)

Italian & Spanish 10 Year Yield

Europe Corporate BBB Yield

Government 10 Year Yield

0.8

1

1.2

1.4

1.6

1.8

2

2.2

2.4

2.6

2.8

3

3.2

3.4

3.6

3.8

4

Feb-11 Jun-11 Oct-11 Feb-12 Jun-12 Oct-12 Feb-13

1

2

3

4

5

6

7

8

9


US debt and asset price deflation

Source: Bloomberg Finance L.P. as at 13.05.13

0.4

0.5

0.6

0.7

0.8

0.9

1

1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 201220

30

40

50

60

70

80

90

100

110

US Household Debt US Nominal House Prices

16


Valuation


18

Historically profits mean revert

Source: MSCI, Morgan Stanley as at 03.05.13

European vs

USA ROE %


19

Source: Smith & Williamson Investment Management Datastream

as at 08.05.13

ROE Price to Book

European ROE & price/book

x%

10

11

12

13

14

15

16

17

18

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 20120.8

1

1.2

1.4

1.6

1.8

2

2.2

2.4

2.6

2.8


Growth


21

The power of money

Annual rates of growth in %, real M1 deflated by consumer prices

and advanced by 3 quarters, on right-hand scale.; real GDP on left-hand scale.

-4

-3

-2

-1

0

1

2

3

4

5

6

-6

-4

-2

0

2

4

6

8

10

12

14

Jan 92 Jan 95 Jan 98 Jan 01 Jan 04 Jan 07 Jan 10 Jan 13

Eurozone real M1,3q fwd, lhs GDP, rhs

Source: Eurostat, ECB, Berenberg

calculations as at 11.03.13

Eurozone

M1 and GDP growth


22

Positive European EPS momentum

Source: Datastream

and Bloomberg Finance L.P. as at 30.04.13

-80%

-60%

-40%

-20%

0%

20%

40%

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013-30%

-20%

-10%

0%

10%

20%

EPS Upgrades v Downgrades De-trended IFO


23

Europe Earnings Growth, Earnings Surprise & EBIT Margins

Actual Earnings Growth (YoY) Actual EPS v 12 Month Forward EPS Actual Change in Non-financial EBIT Margins (YoY)

Source: Datastream

as at 08.05.13

-60

-40

-20

0

20

40

60

80

1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012-6

-4

-2

0

2

4

6

8


24

Eurozone

equities vs

PMI

Source: Bloomberg Finance LP, as at 09.05.13

Germany PMIEuro Stoxx

50 Eurozone

PMI


25

PMI new export orders


ChinaUS SwedenSingapore


Eurozone

crisis


27

VDAX volatility

Source: Bloomberg, Finance L.P. as at 13.05.13


28

Periphery is rebalancing

Change in export share in GDP 2H 2007 to 1H 2012; relative to starting level, in %Change in net export share in GDP 2H 2007 H2 to 1H 2012, relative to 2H 2007 share of exports in GDP, in %

‐10 0 10 20 30 40

SpainGreece

PortugalCyprusIrelandEstoniaMalta

SloveniaPoland

SlovakiaItaly

United KingdomEuro17

NetherlandsSweden

GermanyBelgiumFranceAustria

LuxembourgFinland

Exports share % change

Net exports share % change

Source: Eurostat, Berenberg

11.03.13

Swing in exports and net exports


29

Balancing the external account

Current account balance in % of GDP, Italy, Spain, Greece, Portugal and Ireland; 12-month moving average.

Source: Eurostat, Berenberg

11.03.13

Euro periphery: current account balance

-7

-6

-5

-4

-3

-2

-1

0

Jan 2001 Jan 2003 Jan 2005 Jan 2007 Jan 2009 Jan 2011

Current account (% of GDP)


30

Euro re-rates with equities

Source: Bloomberg, Finance L.P. as at 09.05.13


Intra-market dynamics


32

Cyclical vs

defensive earnings

Cyclicals Defensives

Source: Smith & Williamson Investment Management, Datastream, as at 08.05.13

80

90

100

110

120

130

140

150

160

170

180

Dec-04 Jun-05 Dec-05 Jun-06 Dec-06 Jun-07 Dec-07 Jun-08 Dec-08 Jun-09 Dec-09 Jun-10 Dec-10 Jun-11 Dec-11 Jun-12 Dec-12


33

Relative valuation of cyclical vs

defensive

Cyclicals

F12M EPS Defensives F12M EPS Cyclicals

v Defensives Price to Book


80

90

100

110

120

130

140

150

160

170

180

Dec-04 Jun-05 Dec-05 Jun-06 Dec-06 Jun-07 Dec-07 Jun-08 Dec-08 Jun-09 Dec-09 Jun-10 Dec-10 Jun-11 Dec-11 Jun-12 Dec-120.70

0.75

0.80

0.85

0.90

0.95

1.00

1.05

1.10


34

Bank earnings gap

Cyclicals Defensives Financials


60

70

80

90

100

110

120

130

140

150

160

170

180

Dec-04 Jun-05 Dec-05 Jun-06 Dec-06 Jun-07 Dec-07 Jun-08 Dec-08 Jun-09 Dec-09 Jun-10 Dec-10 Jun-11 Dec-11 Jun-12 Dec-12


35

European banks ROE & price/book

Source: Smith & Williamson Investment Management Datastream

08.05.13

% x

ROE Price to Book

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 20130.2

0.4

0.6

0.8

1

1.2

1.4

1.6

1.8

2

2.2

2.4

2.6


36

Smith & Williamson quant styles -

Europe


Value Revisions Quality

0.85

0.90

0.95

1.00

1.05

1.10

1.15

Jan-08 Apr-08 Jul-08 Oct-08 Jan-09 Apr-09 Jul-09 Oct-09 Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12 Jul-12 Oct-12 Jan-13 Apr-13


Europe and US value vs

growth


MSCI indices value vs

growth

MSCI Europe MSCI United States

70

75

80

85

90

95

100

105

Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12 Jul-12 Oct-12 Jan-13 Apr-13

37


Appendix


39

US operating margin (S&P500)



40

China price/book

Source: Bloomberg, Datastream

as at 08.05.13

x

1.6

1.8

2.0

2.2

2.4

2.6

2.8

3.0

3.2

3.4

3.6

3.8

4.0

4.2

4.4

Oct-10 Dec-10 Feb-11 Apr-11 Jun-11 Aug-11 Oct-11 Dec-11 Feb-12 Apr-12 Jun-12 Aug-12 Oct-12 Dec-12 Feb-13 Apr-13


41

ContactsNick HodgsonPartner, Head of Marketing and SalesTel: 020 7131 4630 Mob: 07720 558636E-mail: [email protected]

Julian PolnikHead of Broker DeskTel: 020 7131 4628E-mail: [email protected]

Dedicated funds website: www.sandwfunds.com

Andrew GrovesPartner -

SalesTel: 020 7131 4756

Mob: 07917 580592E-mail: [email protected]

Matthew KempPartner -

SalesTel: 020 7131 4467Mob: 07584 150797E-mail: [email protected]


42

Key risks•Investment does involve risk. The value of investments can go down as well as up and investors may not receive back the original amount invested.

•Equity (stocks & shares) investment is subject to specific risks

relating to the performance of the individual companies held, the market’s perception of them and systematic risks such as general economic conditions, interest rates, foreign exchange rates and industry sector risks. In general terms, equities tend to be more volatile than bonds.

•When investments are made in overseas securities, movements in exchange rates may have an effect on the value of that investment. The effect may be favourable or unfavourable.

•Investments in smaller companies may involve a higher degree of risk as markets are usually more sensitive to price movements.

•From time to time the Trust may invest in initial public offerings (IPOs) which frequently are smaller companies. Such securities may be subject to greater price volatility than more established securities and are therefore higher risk.

•Past performance is not a guide to future performance.

•Investment is subject to documentation (Prospectus, Key Investor

Information Document (KIID) and Terms & Conditions), copies of which can be obtained free of charge in English online at www.sandwfunds.com


43

Important informationFor professional advisers only -

not for use by or distribution to retail investors.

This document contains information believed to be reliable but no guarantee, warranty or representation, express or implied, is given as to their accuracy or completeness. This is neither an offer nor a solicitation to buy or sell any investment referred to in this document. Smith & Williamson Investment Management (SWIM) documents may contain future statements which are based on our current opinions, expectations and projections.

Smith & Williamson Investment Management does not undertake any obligation to update or revise any future statements. Actual results could differ materially from those anticipated. Appropriate advice should be taken before entering into transactions. No

responsibility can be accepted for any loss arising from action taken or refrained from based on this publication.

The opinions expressed are those held by SWIM at the time of going to print and are subject to change. This material should not be considered by the recipient as a recommendation relating to the acquisition or disposal of investments. This material does not contain sufficient information to support an investment decision and investors should ensure that they obtain all available relevant information before making any investment.

There can be no assurance that the professionals currently employed by SWIM will continue to be employed by SWIM or that the past performance or success of any such professional serves as an indicator of such professional’s future performance or success.

There can be no assurance that the Trust

will achieve its investment objective, the target return or any other objectives. Any target return shown is neither guaranteed nor binding on the Manager.

Any information about specific stocks or investments is given for illustrative purposes. It is considered to be accurate at the time of writing but no warranty of accuracy is given and no liability in

respect of any error or omission is accepted. Any examples of specific stocks are included solely to illustrate the investment process and strategies which may be utilised by the Trust. These investments are not necessarily representative of future investments that the Trust will make.

Smith & Williamson European Growth Trust is a UK domiciled unit trust authorised by the UK’s Financial Conduct Authority.

Issued in the UK by Smith & Williamson Investment Management LLP

which is authorised and regulated by the Financial Conduct Authority (registration number is 580531).

Ref: 550/2013/db

Date post:	22-Nov-2014
Category:	Economy & Finance
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Europe citywire retreat may 2013

Economy & Finance