Fund Objective

The objective is to seek capital growth and increasing income.

View on Past Performance

During the six months from 1 January 2008 to 30 June 2008, the Trust returned -9.41% in capital terms. This compares favorably with the return from the benchmark of -11.00% WM Private Client Capital Growth Index. By further comparison the FTSE 100 index declined 12.87%, while the APCIMS Growth index fell 10.81%.The six months under review has seen significant volatility, with downward spikes at the beginning of the year as markets had their worst January since 1973. Markets continued to experience severe turmoil in the fi rst quarter, with inter-bank interest rates remaining at levels that indicated severe stress. This culminated in the near failure of Bear Stearns in mid March.However, the actions of the Fed to engineer a rescue indicated that the authorities would do all it would take to ensure the stability of the fi nancial system and since mid March the markets have focused on the outlook for the real economy. However by mid May stock markets reversed as the oil price, which had resumed its sharp up trend in February, hit a 'tipping point' with obvious damaging implications for both economic growth and infl ation.On the latter issue, central banks had become increasingly tough in their rhetoric with the result that we saw a signifi cant reversal in interest rate expectations over the quarter. The rapid rise in the oil price, along with its infl ationary implications has meant that the expected cuts in interest rates has been replaced with the expectation that they would have to rise and as a result bond yields had to adjust upward with the 10 year Gilt yield rising by 78 basis points during the quarter.

Future Expectations

The UK economy looks particularly vulnerable, and with it sterling, given its reliance on a heavily indebted consumer and falling house prices. Affordable mortgages are increasingly hard to come by with the cheapest two year fi xed rate deal at over 7%. However, so far there have been little in the way of job cuts. Nevertheless, consumer sentiment is weak and will weaken further as house price declines gather momentum.In the US, the economy is currently showing zero growth as the $140bn tax cuts just about cover the extra costs of gasoline. US house prices have fallen 16 over the past year and show no signs of recovering yet while unemployment is beginning to tick up. Not surprisingly, consumer sentiment is also poor although so far, actual spending has yet to collapse.In Europe, we are concerned that the ECB is making a major policy error in raising interest rates just as the economy starts to subside. At a time when the Euro is trading near all time highs against the dollar, the implications for European business are worrying. In Asia and the major emerging markets of China and India, while growth continues a much higher levels than in the west, there are concerns over the political and economic effects of higher food and fuel costs.

Fund Details