Fund Objective

The fund aims to achieve a level of income above the FTSE All Share Index together with capital growth.

View on Past Performance

Mid-September brought an avalanche of unprecedented bad news with the collapse of Lehman Brothers and AIG and the rescue takeovers of Merrill Lynch and HBOS amongst the most noteworthy. Governments were (and had to be) quick to react with massive bailouts, guarantees and many 'arranged' financial marriages involving some hitherto committed long term 'spinsters'. They also introduced immediate legislation to curb short term speculators.This background led September to be the most volatile month since records began with share prices performing a full cycle in an afternoon rather than the usual five years! This casino like environment was moved by fear and rumour with fundamental investment criteria thrown to the wall. The activities and values of long term investment houses were rendered irrelevant as short termists held sway with trades of the lowest quality.The Support Services sector will continue to grow in a more challenging economic environment. As demands for Government funding increase, their services and ability to improve productivity will be appreciated. Serco, in our opinion, is the purest growth stock amongst large UK companies. It benefits from the growing trends of sophisticated outsourcing from customers as diverse as Atomic Weapons to Her Majesty's Prisons.We expect the Oil Services sector to remain robust as the Oil and Gas industry continues to catch-up from many years of underinvestment. Wellstream is one of only a handful of suppliers of flexible pipelines to the Oil and Gas industry. This is a rapidly growing market serving the developing deep water oil production sector. We believe the outlook for the next couple of years is robust even at oil prices below current levels.

Future Expectations

We believe measures now taken by Governments around the World will restore stability to the financial system and that increased regulation over speculators will lead to a more even playing field for fundamental investors. Common sense and experience should also reassert themselves over quantitative techniques, short termism and panic. The bargains available at the moment are on a par with 1974 and returns for far sighted investors will be spectacular.Our sector strategy remains similar to that outlined in our last update: Telecoms, other Financials, Leisure, Support Services and overseas earners are preferred with Retailers, Food, Drink, Tobacco and Mining underweighted.The corporate sector in the UK is strong financially and can withstand significant earnings downgrades, whilst the UK equity market looks outstandingly cheap on a single figure price to earnings ratio and an attractive yield compared to gilts.

Fund Details