Fund Objective

The trust aims to provide income together with capital growth over the medium to long term.

View on Past Performance

The Fund was maintained with a broadly neutral position against the benchmark during the month. As the problems in the financial sector led to increased anticipation of an economic slowdown, inflation fears have receded and index-linked prices fell dramatically. However the fund benefited relatively from being underweight long-dated maturities as these underperformed during the month.The FTSE World index fell by 11.2%. October was one of the worst months on record for world stock markets. Policymakers in the US, Europe and the UK put the finishing touches to rescue packages for their ailing banks. However, investor concern quickly shifted to impending recessions in the US, UK and Europe. Added to that, several emerging market economies revealed the troubling impact of the financial crisis on their economies.Western markets did not perform well but performed less badly than Asian and emerging markets. Investors abandoned the riskiest assets and sought relatively safer havens like Switzerland. Over the period, the best performing markets for UK investors were Japan and the US, as the dollar and yen made strong gains against European currencies.

Future Expectations

Returns from index-linked bonds had been very strong for the first part of 2008 because of concerns about rising inflation which have now totally disappeared. Over the next year inflation is likely to decline which will then limit the prospective return from index-linked bonds. However, on a 3-5 year view inflation is still likely to remain somewhat higher than the government's target and some protection, through exposure to index-linked bonds, is recommended.

Fund Details