Fund Objective

To maximise long term growth of capital and income.

View on Past Performance

2008 has seen good relative performance from the Japanese market - that is, it has fallen by less than other developed regions. The Fund returned 2.6% over the quarter, 0.3% ahead of its index benchmark.From a regional perspective, whilst other major markets suffered the effects of the credit crunch and rising inflation, the feeling in Japan was that given its recent deflationary economy, the region may benefit from higher inflation feeding through to normalisation of interest rates.Fund performance was mainly accredited to good stock selection. Some holdings in banks and real estate enjoyed strong bounces as a result of a relief rally which ensued after the US Federal Reserve reduced US interest rates. Most notable amongst these were Mizuho and Sumitomo Realty - both held by the Fund.

Future Expectations

Going forward, we expect the Japanese economy to slow as the impact of the credit crunch takes hold. Furthermore, domestic Japanese wage growth and employment may be improving, but this might not be enough to offset rising prices.Any sustained fall in the oil price would ease this slowdown concern but this is unlikely until confidence in the US economy and financial system is restored. Whilst we do not envisage any 'Armageddon' scenario at this stage, global risks do seem to be rising.

Fund Details