Fund Objective

To achieve long term capital growth. Income is not an objective for this Fund.

View on Past Performance

We sold global economy sensitive stocks such as Yushin, Kuroda Electric and Tokai Carbon. On the other hand, we bought domestic businesses more likely to be resilient in a difficult economic environment, such as Ozeki, a very efficiently managed food supermarket chain in Tokyo, and Dr C Labo, a speciality skincare product maker. We also repurchased Asahi Intec, after speaking directly to the management. The medical equipment company is now back on track for growth.The top performer of the month was Tokushima Bank, a regional bank in Shikoku. Other good performers include Nagaileben and Hokuto. On the other hand the worst performer of the month was Furuya Metal, which had previously been a superb performer. There is no negative news and the valuation is still low. Other poor performers include ARRK and Japan Communication. (All of these worst performers of October have rebounded very strongly since the beginning of November).

Future Expectations

The Japanese stockmarket, along with the global market, experienced the worst decline since the popping of the bubble economy. The Nikkei lost 23.8% in October and it temporarily broke the 7000 level on 28 October. Small cap stocks were also severely hit.Looking ahead, however, the prospect is not all gloom. The portfolio is a list of competitive growth businesses, which are relatively defensive from the current trend in overseas economies. Stock prices have been severely affected for non-fundamental reasons but we believe that they will be first to recover when market confidence is restored.

Fund Details