February 2012

NEWS

After a disappointing 2011, markets got off to a promising start in 2012, with the FTSE All Share rising 2.7% in January.

Having launched our private client division in May 2010 and raised £19m new monies, our total funds under management now is £200m.

Private clients are now able to benefit from our institutional and disciplined investment approach coupled with our unique investment style that enables our clients to access the corporate deals of the major City institutions.

PERFORMANCE

Our largest ethically managed charity have outperformed its benchmark during the total period of RCBIM’s management, impressive given the constraints that can exist on an ethically managed portfolio. It has outperformed in nine out of thirteen years.

The Marlborough UK Primary Opportunities Fund (formerly Marlborough Quantock UK Growth) remains one of the leading UK equity funds since its inception in 1996, returning 252% compared to 163% for the mean UK All Companies Fund. The Fund is also top quartile over three years.*

Over the past three years Marlborough Ethical Fund has returned 53.7% compared with 50.6% for the mean Ethical Fund. ** (Source: Lipper/RCBIM)

INVESTMENT OUTLOOK

Over the last two months Purchasing Manager Indices, one of the better forward looking indicators, have shown a modest improvement. This is particularly noticeable in the US, but perhaps surprisingly is also the case in the area of greatest worry – the eurozone. Rising employment in the US reinforces the message that the US is weathering the global soft patch.

Although there is scope for many more shocks in the future, gradual progress in solving Europe’s problems is being led by the regular meetings of Frau Merkel and M. Sarkozy. The European Central Bank made close to €500bn available to European banks ameliorating their short term liquidity problems. The European Banking Authority has ordered big European banks to increase core capital to 9% of risk-weighted assets by June. The first bank to announce a rights issue, Unicredit of Italy, was greeted with a near collapse in its share price. Although the yield on Spanish bonds has fallen, that on ten year Italian remains close to an unsustainable 7%. It is perfectly possible that Greece will default and leave the eurozone. Standard & Poor’s downgrading of Austria, France and others affected sentiment.

The fact that the Shanghai index has fallen for nine straight weeks and trades at a 34 month low indicates that the Chinese economy is slowing. The same is happening in India. The most prominent political flashpoint is probably Iran which is affecting the oil price.

In the corporate world profit margins remain at record levels. Although there is no imminent sign they should at some stage revert to the mean. The yield on UK equities is 3.3% with the prospect of reasonable dividend growth for the foreseeable future. The overpricing of haven investments is graphically illustrated by a ten year gilt yield of 1.9%. The negligible yield on cash will last a long time.

In between the inevitable setbacks, some of which are likely to be quite sharp, we expect investors to take advantage of good equity yields and for markets to drift up.

* Source: Lipper to 31 January 2012. Ranked 10 out of 92. Three years to 31 January 2012. 65.5% v 56.1%. Ranked 51 out of 272.

** Source: RCBIM/Lipper to 31 January 2012. Benchmark: Selected Ethical Universe by RCBIM. Ranked 5 out of 14.

Past performance is not necessarily a guide to future performance. The value of investments and the income from them can go down as well as up and investors may not get back the amounts originally invested.