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May

Whilst the portfolio’s weighted average discount remained unchanged at 24.8% over the month, there were some large individual moves.

The discount on Aker widened by over 3 percentage points to 44%, making it the largest detractor from performance as its shares fell by over 6%.  Teck Resources was another large detractor falling 21% over the month as weakness in the coal price led the company to temporarily shut down its coal operations.

On weakness, we added to Eurazeo where the pace of portfolio recycling has been picking up.  Following its IPO in February, the share price of Elis is up by more than 40% and this has contributed to Eurazeo’s NAV growth.  Moncler was similarly “IPO’d” at the end of 2013 without Eurazeo selling shares in the market until last month, when the shares were approximately 70% higher than the IPO price.  The next IPO is due in coming weeks when Eurazeo will be bringing Europcar to the market.  Following a multi-year turnaround in Europcar’s fortunes, we anticipate another step towards a successful exit from this investment.

Relative discount moves at GBL and Pargesa have allowed us to gain exposure to the same group of underlying assets, but at a more attractive discount.  Whilst GBL’s discount has remained flat over the course of the year at around 27%, Pargesa’s has widened from 22% at the start of the year to 34% recently.  Pargesa’s sole asset is a 50% stake in GBL and with little in the way of administrative expenses at Pargesa, there is no justifiable reason for the divergence in discounts.  In the past the discounts on the two companies have on average been more or less in line with each other.  A return to this long-standing trend would see Pargesa outperform GBL and for this reason we have been switching out of GBL in favour of Pargesa.

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