Fund Objective

The fund's objective is to maximise total return over the long term by a combination of dividend growth and capital appreciation.

View on Past Performance

The Trust has continued to show positive returns over the period rising 11.7% (bid to bid basis), which compares to the return of 12.6% (in sterling) recorded by the MSCI World Free Index (total return) over the same period.Equity markets have produced further solid returns over the period, not withstanding a period of weakness in the first 3 weeks of October, with concerns about rising inflation and a resultant extended period of US interest rate tightening serving to create a brief bout of profit taking from equity investors. However, by the end of the period markets had re-gained the momentum seen since March 2003.Commodity prices continued to rise and this contributed to the Resource related sectors leading markets higher. The period was blighted by the terrible storms that swept across Southern States of America, but in the event this had little impact on the upward movement in markets.The best performing major equity market over the period was Japan (up33.6% in local currency), following further evidence of an end to the deflationary economic backdrop and a favourable outcome to the Upper House Election. Other major equity markets to support double digit returns included Switzerland (up 19.2%), Germany (up 16.4%) and The Netherlands (up 15%).The UK market also benefited from the positive equity sentiment with the FTSE All-Share Index showing a rise of over 10%, although leadership reverted to small and medium sized companies which showed gains of 12% and 17% respectively. The UK market was supported by M&A activity, both real and rumoured. The largest deal announced was the bid by Telefonica for O2 and earlier in the period the long running battle for BPB was won by St Gobain.

Future Expectations

The major equity markets, although not expensive, appear fairly fully valued and bond markets are, to our eyes, now overvalued and likely to show only minimal returns. The UK Commercial Property market has seen significant demand from both institutional and private investors, resulting in yields which now look less attractive.We believe stock picking and our ability to identify positive themes within the markets will be important in producing satisfactory returns going forward.

Fund Details