Fund Objective

To provide capital growth over the long term.The Fund seeks to outperform the S&P 500 Net Index by focusing on stock selection as the key source of excess return.

View on Past Performance

The anniversary of the credit crisis ushered in a period of heightened panic and volatility as markets for short term funding came to a virtual standstill. The fund underperformed its benchmark as strong returns from the portfolio's energy and telecom holdings were not sufficient to overcome lacklustre returns from its materials and industrials exposures. The portfolio's momentum exposures also detracted from performance, while value aided results.Among the holdings that disappointed during the period was an overweight position in Freeport-McMoRan Cooper & Gold. The company reduced its 2008 sales outlook for copper because of a small-scale failure at one of its mines in Indonesia. A lack of exposure to Wells Fargo and JPMorgan Chase, both of which advanced during the quarter, also detracted from relative performance.Among the portfolio holdings to enjoy strong returns was an overweight position in military contractor Lockheed Martin. The company reported that second-quarter profit rose 13% as increased demand for military helicopters helped sales. A lack of exposure to AIG and Apple, both of which declined during the period, also added value in relative terms.

Future Expectations

We view the proactive steps taken by American authorities as beneficial for US assets relative to the rest of the world. As the recovery in the US dollar may be suggesting, the focus may begin to shift to pressure on policymakers elsewhere (most notably in Europe) to take a more holistic approach to their domestic problems, rather than responding to bank failures on a piecemeal basis.

Fund Details