Fund Objective

The Fund aims to achieve an above average level of capital growth through investing in the quoted securities of companies operating in the United Kingdom.

View on Past Performance

Software is now the largest sector position. Iit offers attractive growth with demand growing in many parts of the continent as well as the UK. The sector is now supported by strong dividend generation. Many companies are exposed to the rapidly growing 'Business Process Outsourcing' sector.The Travel & Leisure sector offers an attractive cocktail of strong asset backing and reliable cash flow and businesses which are more resilient to a consumer downturn. William Hill was a major purchase during the quarter and is a leader in UK betting which has been gradually de-regulated. The shares sell on a sub-market rating with attractive dividend growth and its profits are likely to be more resilient than traditional defensive shares.The Aerospace industry offers attractive growth in both civil (increasingly from Asia) and defense. The industry is higher quality than in the past due to the increasing proportion of service and spares in the mix. BAE Systems, which we increased via a placing, has the positive dynamic of leading positions in defence with an increasing exposure to the US defence budget and land based systems. The short-term commotion over incentives created a buying opportunity.BT has delivered both operationally and financially and is now focusing on becoming the best service provider amongst its peers. Iit offers an attractive dividend yield with solid growth. Vodafone has performed very well this year as the stockmarket regained confidence in the management and financial returns have been delivered.

Future Expectations

The UK equity market is still reasonably valued on a price earnings ratio of 13½x, a dividend yield of 3% and free cash flow of 6½% with a fairly stable growth and inflation outlook.The catalyst that has fuelled Private Equity deals (borrowing costs vs. target free cash flow generation) is becoming tighter and with an increased risk of more competitive trading many mid cap stocks have fallen sharply. As always we will only buy mid cap stocks on fundamentals not takeover speculation.Financial sectors have been marked down on fears that inappropriate hedge fund activity in CDO's (Collateralised Debt Obligations) and low credit quality activities will spread to the conventional banking sector. This coupled with the Barclays/RBS potential takeover of ABN has dragged the big UK banks down to valuations which discount a serious credit crunch or full blown recession.Solid dividend generators, particularly amongst the largest companies where we see considerable value, especially within the Telecoms and Financials sectors, and quality franchises will remain the core of our portfolio.

Fund Details