Growth Trust - January 2012 update

Positioning has remained relatively unchanged in the last part of the year. We had made structural changes in the portfolio when euro debt problems escalated in the summer. Activity was low over the period, as we felt that the market backdrop was unlikely to change materially. We continued the theme of avoiding cyclical stocks, except where there was an interesting angle or an exceptionally resilient business model. In keeping with our secular growth theme we maintained our exposure to companies which we think stand to benefit from the overall trend for outsourcing, for example catering company Compass Group or the engineering services company with government defence contracts, Babcock. Other themes in the portfolio include companies which could benefit from capital expenditure in the resources sector, such as Kentz Corporation.

The market risks to the Trust relate to the depth and length of recession that Europe is going into and the extent to which the UK and the rest of the world get dragged into it. We don’t have much European exposure generally, nor do we have that many consumer facing companies in the UK as we think these could also suffer. Overall, we are confident in the Trust’s current positioning which is to hold stocks with a high quality bias, or ones which we feel are positioned to be more resilient.