Element Global Opportunities Equity Portfolio

August 2012

The Element Global Opportunities Equity Portfolio has the mandate to go anywhere in pursuit of attractive investment opportunities, using a bottom-up investment approach. Being equity focused, the portfolio has at least 70% of its assets invested in international equity markets. The portfolio uses as benchmark the MSCI World (Local) but it does not seek to mimic or track this index in any way, which may lead both geographic and sectorial allocation differences.

Portfolio Details
Net Asset Value : Portfolio Assets (): Launch date: Portfolio Managers: 97.81 69100 14-January-2011 Filipe Alves da Silva, CAIA Afonso Janurio

Investment Highlights
Investors love story with China is over. The investment community is coming up with problems at every corner: there is a lot of bad debt in Chinas banks, regions have too much debt, there are ghost cities, China is only growing at 7% per year, Chinas low cost producer advantage is fading away as wages rise, and the list goes on. This is having an impact on Chinese stocks, which now trade at around 8 times earnings, the lowest valuation in a long time sounds attractive! In a World where the US is growing at 2% per year, and Europe in hiatus, the reason why someone would complain about an economy growing at only 7% is beyond us. We like putting things into perspective, it just makes it simpler to understand. The GDP growth generated in China last year is equal to creating the equivalent of another Australia, Spain, Mexico, South Korea, or about two Turkeys each year. China creates the equivalent of another Greece every 11 weeks. Truly amazing. Consumption as a % of GDP is low, at 35%, but as years turn into decades this will grow closer to the typical value for more mature economies (60-80%). Combining a fast growing economy with an expansion in the consumption share of GDP paves the way to what will be the biggest consumer economy in the world. This process has already started. Chinas middle class is growing fast, with the country now having more households than the US with a disposable income above $10k. But there is a still a long way to go: as an example, in China there are only 50 cars per 1000 habitants. This compares with 550-800 for developed countries and 100-250 for comparable emerging economies. We could give similar examples, but we think you get the idea. Another interesting statistic is the use of bankcards: card use in China will mushroom over the next decade, and along with it the use of point of sales (POS) terminals (the small terminals where you insert your card into when making a purchase at a store). There are only 3 per 1000 inhabitants, comparing with 20-30 in the West.
MSCI World Local
Portfolio

Investment Guidelines
Max. Long Exposure: Min. Long Exposure: Equity Hedging: 130% 70% May use options on single name equities or equity indices to hedge downside risk Hedged on a best effort basis

Currency Hedging:

Weekly Performance Chart

106 103
100 97 94 91 88

85 82 Jan-11 Apr-11 Aug-11 Nov-11 Feb-12

May-12

Aug-12

Following this reasoning we invested in PAX Global Technologies, the market leader for POS terminals in China. But a good story doesnt make a good investment, and we will only make the investment if the price is right. It is all about how much you pay. PAX is debt free, has a considerable liquidity position and is growing at around 30%. We started buying shares at 7 times ttm earnings (3 times if you exclude cash). The comparable company is Frances Ingenico, which is growing at 10% and trades at 20 times this years estimated earnings. Which would you rather own? Year to date the portfolio is over-performing the MSCI World by +3.65%.

Monthly Performance
Jan 2011 2012 -1,11% 7,06% Feb 1,61% 5,19% Mar -2,05% 1,62% Apr 3,30% -0,86% May -1,25% -6,98% Jun -1,72% 2,62% Jul -1,37% 0,62% Aug -7,23% 2,67% Sep -7,20% Oct 8,70% Nov -2,83% Dec YTD -1,18% -12,57% 11,87%

Disclaimer: Past performance is not indicative of future performance. Reference in this document to specific securities should not be construed as a
recommendation to buy or sell these securities.

Element Global Opportunities Equity Portfolio

Allocation by Sector
Cash Real Estate Utilities Telecommunication Services Materials Health Care Consumer Staples 1,0% 0,6% 7,6%

Allocation by Country
Cash Others Brazil China Netherlands Italy Sweden Spain Switzerland Germany Australia France Canada United Kingdom Japan United States 0% 7,6% 6,8% 1,7% 6,7% 0,2% 0,2% 0,2%

4,1%
3,9% 6,0% 13,4% 17,8% 1,7% 1,9% 31,8% 10,8% 0% 5% 10% 15% 20% 25% 30% 35%

7,2%
0,6% 4,2% 0,6% 2,2% 4,3% 1,9% 1,4% 54,4% 10% 20% 30% 40% 50% 60%

Consumer Discretionary
Energy Industrials Information Technology Financials

Top 10 Positions
i Sha res MSCI Worl d ETF Hedged Appl e Inc IBM Mi cros oft Corpora ti on Peps i Co Fi del i ty Chi na Speci a l Si tua ti ons Ama deus IT Hol di ngs Teva Pha rma ceuti ca l s BMW Archer Da ni el s Mi dl a nds

Weight
15,9% 8,4% 7,2% 7,1% 5,8% 5,5% 4,0% 3,9% 3,6% 3,3%
120%
101,9%

Currency Exposure
100%

80% 60% 40%

20% 0% -20%
-15,0%
6,1% 1,7% 3,5%

0,3%

2,0%

Total

64,7%

-40% EUR USD CNY BRL CAD GBP UAH

Glossary
Bottom-up Investing A bottom-up strategy overlooks broad sector and economic conditions and instead focuses on selecting a stock based on the individual attributes of a company. Advocates of the bottom-up approach simply seek strong companies with good prospects, regardless of industry or macroeconomic factors. Net Asset Value The total value of a companys assets less the total value of its liabilities is its net asset value (NAV). For valuation purposes it is common to divide net assets by the number of shares in issue to give the net assets per share, also known as the price per share. Long Exposure Percentage of the Portfolios assets that are invested in equity markets and that benefit from the appreciation of equity markets. Currency Hedging Transaction implemented to protect the Portfolios foreign currency positions (non-Euro) from an unwanted move in exchange rates. Top 10 Positions Top holdings are those securities in which the latest percentage of the Portfolios total assets are invested. They do not include hedging derivatives. A full list of holdings, including derivatives, is available upon request.
E L E M E N T C A P I T A L

Contacts
For more information please contact Afonso Janurio or Filipe Alves da Silva directly or send an email to element.cap@gmail.com

LONDON

GENEVA

Disclaimer: Past performance is not indicative of future performance. Reference in this document to specific securities should not be construed as a
recommendation to buy or sell these securities.

Element Global Opportunities Equity Portfolio

Complete List of Holdings

Name
iShares MSCI World ETF Hedged Apple Inc IBM Microsoft Corporation PepsiCo Fidelity China Special Situations Amadeus IT Holdings Teva Pharmaceuticals BMW Archer Daniels Midlands Berkshire Hathaway BlackRock Telefnica Lowe's Avangard Corning Inc Jakks Pacific MRV Engenharia Renault Energold Drilling Monument Mining IMAX Corporation GAP Inc Chatham Lodging Trust OPAP Telefonica 11 PUT 06/2013 Cninsure PAX Global Technology Premier Exhibitions Ted Baker Addvantage Technologies La Seda de Barcelona Cash

Weight
15,9% 8,4% 7,2% 7,1% 5,8% 5,5% 4,0% 3,9% 3,6% 3,3% 3,2% 2,6% 2,2% 2,1% 2,0% 1,9% 1,8% 1,7% 1,6% 1,3% 1,2% 1,0% 1,0% 1,0% 0,9% 0,7% 0,6% 0,5% 0,5% 0,3% 0,3% 0,1% 6,9% 100,0%

Total

Disclaimer: Past performance is not indicative of future performance. Reference in this document to specific securities should not be construed as a
recommendation to buy or sell these securities.