Fund Objective

To seek long-term capital growth.

View on Past Performance

The New Star UK Special Situations Fund fell 3.7%* during December while returns from the UK equity market in general were broadly flat over the month despite significant intra-month volatility. The Bank of England Monetary Policy Committee cut its bank rate for the first time since August 2005 but the defensive areas of the market continued to provide the best returns.The fund had a difficult end to 2007. Investor sentiment towards cheap, growth companies within the portfolio such as SIG and Severfield-Rowen remained negative while the fund's recovery stocks with considerable self-help potential such as Charter and Invensys also remained out of favour. In addition, some of the smaller companies held such as Vyke and Camco fell despite announcing good news.The mining and energy sectors provided some of the best returns within the portfolio. International Ferro Metals increased 43.7% and Central Rand Gold gained 16.6%. Other good performers included BAE Systems, Royal Dutch Shell and British Energy. Few transactions were undertaken over the month. The position in Marks & Spencer was sold ahead of the company's Christmas trading update but the holding in Charter was augmented after a positive trading update.

Future Expectations

2007 was a poor year for value and contrarian investors alike and such trends may continue in the early weeks of 2008. It is likely, however, that equity market investors will at some point start to appreciate the positive effects of falling interest rates globally. In such circumstances, cheap and well-managed value companies have the potential to outperform the broader market.

Fund Details