Fund Objective

The Premier Enterprise Fund aims to provide long term capital growth through investment principally in a portfolio of securities which, in the manager's opinion, have a high potential for capital and/or income growth and which will produce capital appreciation over the longer term.

View on Past Performance

Continuing worries about the stability of the global banking system caused weakness in markets over the quarter; the FTSE 100 Index fell 12.86% and the FTSE Investment Entities Index (covering the investment companies sector) was down 14.56%. The MSCI World Index fell 15% but dollar strength relative to sterling converted this into a decline of just under 6% for the UK investor.The market is now focusing on the broader implications of the near collapse of the banking system and the resultant coordinated government response. Issues dominating markets are the likely depth and length of the recession that must occur in 2009 and the consequences for world trade, interest rates and currencies. It was a poor quarter for the Fund which declined 21% over the period.The weak portfolio performance was due to the sell off in commodities, a sector in which some profits had been taken but where the Fund still had significant exposure to both physical commodities through structured products and to funds investing in mining and resources companies. In addition we had further indirect commodity exposure through our holding of JP Morgan Russian.During the quarter our commodities exposure decreased from 18.9% to 11.8% with sales made from our holdings of DWS Commodities, BlackRock World Mining and Close Enhanced Commodities. New investments included some tentative increase in our exposure to property with purchases of Terra Catalyst and Brixton. The other significant asset allocation change was the increase in our our cash weighting. At the end of September our holding of Chameleon was unitised allowing us to sell at net asset value.Taking account of the cash proceeds from this sale we went into October with cash of over 13.3%.

Future Expectations

Looking forward there are a growing range of opportunities in which we will be able to deploy our cash. Whilst the investment trust sector as a whole has held it rating remarkably well given the severity of the market downturn there are individual situations where tremendous value is emerging. The listed hedge fund and fund of hedge fund sector has moved from a premium to discounts ranging from 10% to 50%.Some property funds, particularly those in danger of breaching bank covenants, are trading at distressed levels but those that survive will have considerable upside in time. Even in the mainstream global generalist sector Alliance Trust is offering good value on a discount of over 20%. Whilst it is impossible to call the bottom on this market there will be some great recovery opportunities in the investment companies sector.

Fund Details