As the markets became more volatile over the last three to six months, it was the more traditionally
defensive stocks that held up best and produced the best returns in our mutual fund portfolios, i.e., the
beverage, tobacco, and healthcare holdings. This included companies such as Coca Cola Femsa, Diageo,
British American Tobacco, Roche, and Johnson & Johnson. A number of our industrial holdings also
performed well including Kone, the Finnish elevator company, and Krones, the German beverage
As concerns about the Southern European debt crisis and uncertainty surrounding the raising of the
debt ceiling in the U.S. resurfaced, the financials began to contract, especially a number of our insurance
stocks, such as Zurich Financial, Munich Re, and Berkshire Hathaway. Our media holdings were also
down during the quarter, led by Axel Springer and Mediaset Espana. Also, oil & gas stocks were
impacted by a decline in oil prices, and by what appeared to be slowing economic growth rates.
ConocoPhillips, Devon Energy and Total declined in price during the quarter.
Portfolio activity was once again relatively modest during the quarter with no noteworthy new
purchases and sales. We did add to a number of our positions and trimmed a number of others as pricing
opportunities presented themselves. Among the securities that we added to were Zurich Financial, Total,
Wells Fargo, Metcash and Novartis among others. We trimmed our positions in Jardine Strategic, Kone,
Linde, Nestle, Philip Morris International, and Henry Schein.
Despite continued macro challenges around the globe and increased near-term volatility, global equity
markets as measured by the MSCI World Index are up approximately 82% in local currency over the last
two plus years since the depths of the crisis, and the performance of our Funds has been no exception. The
Global Value Fund, Value Fund and Worldwide High Dividend Value Fund have advanced between 88%
and 94% from the crisis lows in March of 2009. Our newer Fund, Global Value Fund II-Currency
Unhedged, has also gotten off to a good start since its inception in October of 2009. This has resulted in a
narrowing of the price-to-value relationship in our Fund portfolios, and in public equity markets. It is
somewhat understandable that as equities become more fairly valued, volatility sometimes increases as
markets react more skittishly to the daily onslaught of headline news. That said, equity valuations in our
Fund portfolios remain, in our opinion, quite attractive relative to many fixed income alternatives.