Fund Objective

The aim is for investment performance to be consistently above the average fund in the IMA UK All Companies Sector for periods of up to one year and to be in the top quartile of such funds for any longer periods.

View on Past Performance

Investor concerns over further contagion from the US sub-prime mortgage market continued to weigh heavily on markets during August. UK equities posted slightly negative to flat returns for the month, with the FTSE 100 Index falling below 6000 on 16 August. This was its largest one-day fall since March 2003, led sharply lower by financial companies.The Growth & Income Fund's performance was affected by the volatility that hit UK equities in August, but held up better than many funds in its sector on the back of good stock selection. Our holdings in airline stocks easyJet and BA were positive for performance on the back of reassuring traffic numbers. Conversely, the mainnegative influence in the month was SilverJet, which fell on news of the disposal of its non-core charter operations. Other positive contributions to performance came from our positions in Keller, Cookson and Weir, all of which performed well following better-than-expected earnings results and the market re-rating stocks with perceived earnings certainty. This trend was also helpful for Autonomy.

Future Expectations

The UK stock market should find support from improving sentiment as investors start to look beyond a peak in interest rates. However, we are wary of the problems in credit markets. We remain biased towards the industrial and mining sectors, which are continuing to benefit from strong demand and supply side discipline,despite some concerns over a slowdown in global growth. We believe investors have priced in an overly pessimistic outlook for some companies in the banking sector, where we expect earnings trends to be more sustainable than the market expects.

Fund Details