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April

The portfolio has continued to benefit from increasing levels of corporate activity, with a number of our European holding companies having exposure to the large M&A deals currently in the pipeline. As business confidence in Europe continues to grow and with credit becoming more readily available, the conditions are ripe for this trend to continue. With our portfolio, trading on a weighted average discount of almost 28%, there is every possibility of our portfolio continuing to be a beneficiary of this.

Lafarge makes up c20% of GBL’s NAV and the positive share price reaction to its tie up with Holcim helped push GBL’s share price up. Investor AB owns a 4% stake in Astra Zeneca that makes up just under 10% of its NAV and the news of Pfizer’s interest in taking over the company boosted Investor AB’s NAV and share price accordingly. Investor AB saw its discount narrow from 24% to 20% over the month and its share price increased by 7.6%.

At the smaller end of the market cap spectrum, LMS Capital announced the sale of its largest holding, Updata Infrastructure, to Capita at a price representing a 5.3x return on cash invested and an IRR of 52% since acquisition. The holding, 13% of NAV at year-end, was sold at a 36% uplift to last reported carrying value and had already been written up by almost 50% over 2013. The exit provides additional confirmation of the conservative marks used to value its mature portfolio, and we anticipate further exits at uplifts to NAV. A £40m tender at NAV has been announced, after which almost 60% of our original cost will have been returned to us with our holding showing a 59% gain.

The turbulent political environment in Turkey has weighed on the shares of Dogan Holding, a Turkish media and energy holding company. Despite owning a variety of attractive assets across the media and energy sectors, , we estimate the shares trade on a discount to SOTP of almost 60%, with 90% of Dogan’s market capitalisation covered by cash held in USD at the holding company level. While there is a medium term catalyst in place with the resumption of dividends from 2016 once an accumulated loss is paid off, we were pleased to see more immediate action taken to tackle the discount in April with the company announcing a buy-out of minorities in its 80%-owned listed subsidiary, Dogan Yayin Holding, whose own shares trade at an estimated 60% discount to SOTP. The elimination of the double-discount was well received by the market, with Dogan’s shares rising 7.5% over the month.

We made one new investment during the month. Westfield Group is an Australian listed investor in retail property around the world. It trades on a discount to its NAV of 26% and we anticipate this narrowing in coming months as the company splits into two separate entities. Part of this discount is due to investors perceiving Westfield Group as a pure Australian company, which is considered a low growth market. In reality its Australian operations represent less than one-third of its gross assets. In an attempt to combat this perception and to boost the share price, Westfield has outlined plans to separate its mature Australian and New Zealand assets and to combine them with assets held by the Westfield Retail Trust, an Australian listed retail REIT, to form Scentre. The remaining assets will be re-listed, most likely in NY, as Westfield Corp, which will have the bulk of its assets in the US and Europe. We expect the valuation for this company to appreciate as its rating moves into line with other US REITs.

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