Fund Objective

The objective is to achieve long-term capital growth and income.

View on Past Performance

During the half year under review the Trust returned -3.0% on a bid-to-bid basis, excluding income. This compares to a decline of 6.5% in the Trust's benchmark, the WM Growth Index. Over the same period the FTSE 100 Index fell 7.96% and the FT Government All Stocks Index declined by 2.78%.The past six months has seen considerable volatility in equity markets as investors faced the uncertainty of the continuing credit crisis, rising infl ationary pressures and weakening economic growth. The half year started with markets falling sharply as fears grew over the stability of the fi nancial system. Banks remained weary of lending to one another, unable to value the asset backed securities held in their various special investment vehicles that had to be brought back on balance sheet.Also of great concern were the credit ratings of the monoline bond insurers. These fears culminated in the near collapse of the US investment bank Bear Stearns. However, J P Morgan's rescue takeover of Bear Stearns, engineered by the Federal Reserve, marked a reversal of sentiment as investors saw that the Fed would do all it would take to prevent a major bank collapse.There then followed a signifi cant rally in equity markets during which time attention shifted back onto the economy and the health of the consumer and the corporate sector. The rally came to a dramatic halt in mid May as commodity prices, in particular oil, reached new peaks, sparking fears of infl ation. Interest rate expectations shifted rapidly from anticipating cuts to expecting increases.

Future Expectations

The UK economy looks particularly vulnerable, and with it sterling, given its reliance on a heavily indebted consumer and falling house prices. Affordable mortgages are increasingly hard to come by with the cheapest two year fi xed rate deal at over 7%. However, so far there have been little in the way of job cuts.Nevertheless, consumer sentiment is weak and will weaken further as house price declines gather momentum. In the US, the economy is currently showing zero growth as the $140bn tax cuts just about cover the extra costs of gasoline. US house prices have fallen 16% over the past year and show no signs of recovering yet while unemployment is beginning to tick up. Not surprisingly, consumer sentiment is also poor although so far, actual spending has yet to collapse.In Europe, we are concerned that the ECB is making a major policy error in raising interest rates just as the economy starts to subside. At a time when the Euro is trading near all time highs against the dollar, the implications for European business are worrying. In Asia and the major emerging markets of China and India, while growth continues a much higher levels than in the west, there are concerns over the political and economic effects of higher food and fuel costs.

Fund Details