Fund Objective

To provide long-term capital growth.

View on Past Performance

After a September that will go down in financial history, the global property securities market ended the quarter down, but outperformed global equity markets. The sector continues to be pressured by the credit crisis and slowing growth as correlations between property stocks and US financial stocks have increased. During the period, Norway and Austria posted the poorest returns while South Africa and US posted the best.Our selections in Japan and Australia performed well over the period, while our underweight to the US detracted from returns. Digital Realty Trust, a US-based technology-related REIT, added value as the stock rose after reporting strong earnings, given high demand and low supply.A top detractor for the period was Sung Hun Kai Properties, which fell during the quarter after warning of slowing near-term growth in its core markets of Hong Kong and China.

Future Expectations

In this environment, restricted access to and higher cost of capital continues to be a key risk to growth for the sector. Property is a lagging indicator and we see risk to earnings for the rest of 2008. Expectations for 2009 earnings have been lowered in a number of countries, providing the possibility for upside.While weaker global growth suggests the outlook for returns will be challenged, this, coupled with lower inflation, should allow interest rates to fall. Alongside narrowing credit spreads, this should offer some support for the market. We continue to be underweight the US and are overweight in parts of Asia, particularly Japan and Hong Kong.

Fund Details