Fund Objective

The investment objective of the Scheme is to achieve capital growth.

View on Past Performance

The Topix fell 3.8% in Yen terms in August. Trading volumes and newsflow were generally light, especially during the Obon holiday period in mid-month. As the oil price has fallen, global market focus has shifted away from inflation risks (which some believe benefit Japanese equities) to the potential for downward revisions to worldwide economic growth (which is troubling for an export-oriented economy such as Japan).The fund outperformed its peers- with large holdings in defensive stocks, such as Kao (household goods), Eisai (pharmaceuticals), and East Japan Rail to the fore. Financial stocks were notably weak, for both the fund and the market in general, as investors worried about credit exposure to troubled smaller Japanese real estate companies.Trading was light this month. Strong outperformance from defensive issues left some of these stocks looking less compelling than previously and hence candidates for a reduction in weighting. Tokyo Gas and Japan Tobacco were reduced slightly. The fund initiated a position in JS Group - a leader in building materials trading well below its net asset value.

Future Expectations

Unfortunately, with the global economic situation continuing to look bleak, it is difficult to identify a catalyst for an improvement in Japanese equity market conditions. Share price falls, however, are driving valuations in several quality companies (especially exporters), on some measures, to historic lows. We will look to take advantage of this to buy selected positions for the longer-term, but the fund overall will continue with its current cautious positioning.

Fund Details