Fund Objective

The investment objective is to achieve long-term capital growth.

View on Past Performance

The fund (B shares) returned +6.0% in the month ending 31st August 2008. This compared to the FTSE All Share return of +5.0% and +3.9% for the median fund of the All Companies Sector. This placed it 26th out of 323 funds for the month. A strong rebound for equities, led by some of the more depressed areas of the stockmarket and $ earners.As we suggested last month, "predicting market levels is always fraught with danger but it is fair to say that the oil price will be the key short term driver of sentiment." Short covering by hedge funds clearly played a role in the sharpness of some of the moves, and we suspect that fund outflows are causing some deleveraging to occur.Mid caps were the best area, reflecting the exposure to housebuilding and retail, while the $ earners more heavily populate the FTSE 100, which was only just behind the FTSE 250. Smaller companies retuned 4.9% although interestingly the median fund returned 2.2% and only 10% of funds outperformed. AIM was much worse, reflecting primarily the preponderance of mining and oil stocks, and mining in the FTSE All Share was one of the worst areas as commodity prices showed further weakness.The weakness of smaller companies - both fully listed and AIM - is not a good background for the Fund, and our monthly performance is down to several decent stock moves (see below) and the nil holding in mining stocks.

Future Expectations

Oil has continued to fall and neither the Russian intervention nor Hurricane Gustav has inspired a rally. This is undeniably helpful. Sterling's correction has been sharp, with various implications; positive for exporters and overseas earners, bad for inflation, bad for imported costs (especially bad for retailing margins).For the earnings of the average quoted business it is positive. We suspect that the rally in some of the more troubled stocks has run far enough, and that there will be a correction. The UK consumer remains stretched and there is little to suggest that that will change.

Fund Details