Fund Objective

The Fund's aim is to invest primarily in the equity of companies domiciled in Europe or with significant European activities.

View on Past Performance

European equities fell sharply in September as the financial crisis escalated. The FTSE W Europe (ex UK) Index lost 11% of its value.Sector allocation made a strong contribution to the fund's performance. An overweight exposure to telecoms and healthcare and an underweight position in materials were helpful. Stock selection also proved positive. Key contributions came from France Telecom and not owning Rio Tinto and Anglo American.However, Norsk Hydro (which was hit by falling commodity prices) and Commerzbank (which was affected by the banking crisis) had a negative influence. We bought Land Securities and Morrisons; the latter should benefit as grocery shoppers trade down to lower-price stores. We sold HBOS, given the uncertainty about its takeover by Lloyds TSB, and Centrica.

Future Expectations

We remain cautious about the short-term outlook for equities. Inflation is now less of an issue and may already have peaked. We are more concerned about the problems gripping financial markets, and the prospect of slowing growth and rising unemployment across Europe over the next year or more. We remain defensively invested.

Fund Details