Fund Objective

To achieve capital growth.

View on Past Performance

There was very little activity on the portfolio during the period. Exposure to financials was reduced slightly via the sale of small positions in ING and Marfin. We used these proceeds to reduce our underweight positions in the materials and industrials sectors via purchases in Hochtief, Outokumpu and Arcelor, which following severe price weakness are trading at close to historic trough valuations.It was another extremely volatile month in European equities, with investors focusing on the deteriorating outlook for corporate earnings given the increasing evidence that the global economy has slowed sharply. The portfolio benefited from positive contributions from holdings in the telecom and financials sectors. However, overall performance was distorted by a technically-driven rally in Volkswagen.

Future Expectations

While European equities are likely to remain volatile due to the ongoing recapitalisation of the global banking system and the deteriorating global economy, on a medium term perspective European equities now offer considerable value. We believe a gradual increase in weightings taking advantage of market dips would be the most appropriate strategy.Within the portfolio we continue to focus on mainly larger companies with strong balance sheets and well covered dividends, while we have selectively over recent months being picking up some more cyclical companies whose valuations are approaching historic troughs.We feel adopting such a barbell strategy will provide solid support through the current markets, but will also position us well as the medium term prospects improve and investors start to look forward to an improving environment later in 2009.

Fund Details