UK equities ended the fourth quarter virtually unchanged but experienced a high degree of volatility on concerns that the crisis in credit markets would lead to a global economic slowdown. The FTSE All-Share index fell 0.3% in total return terms. Central banks reacted to the worsening credit environment and the threat to economic growth by cutting interest rates.UK rates were cut by 25 basis points to 5.5% in December, while the US Federal Reserve lowered rates twice more to 4.25%. The Fund performed well over the period. This was partly due to its bias towards large caps, which outperformed their smaller peers. Transactions during the period included adding to Compass, which has opportunities for margin expansion, and British Airways, which should benefit from Terminal 5 opening.We also took profits in Rio Tinto, which soared following a bid approach from BHP Billiton.