Fund Objective

To provide long-term capital growth.

View on Past Performance

Asian equities were devastated in the third quarter. The migration from skyrocketing inflation to global deceleration has been brutal for corporate profits and we now expect negative earnings growth in 2008 and no earnings growth in 2009.Markets look cheap, but deeper analysis suggests they could fall materially if the economic environment deteriorates further. There is no reason to assume that the first world is not already in recession. Even more worryingly, the powerhouse BRICs economies are now decelerating.Deleveraging is compounding the situation. The demise of investment banks and other financial entities, and the forced balance sheet reduction of others, has led to concerted selling. Equities, being most liquid, suffered the most at the outset. Illiquid assets and property are feeling the pain now.In the fund, our overweight in China equities and reluctance to be totally defensive in regional stock selection have hurt performance. However, Korean stock selection has been very good and the fund has avoided small caps and concept stocks, which have been performed very badly.

Future Expectations

We envisage the markets trading down again, but probably not making new lows. We expect the Chinese government to unveil more fiscal and monetary responses to a slowing economy, especially as mainland inflation seems under control.But the global economy will undoubtedly slow, and so the next two years could present difficult environments for profits and, therefore, equities. The challenge will be to locate and invest in the handful of companies which combine solid balance sheets with exciting earnings prospects.

Fund Details