Fund Objective

The fund’s investment objective is to achieve capital appreciation through participation in the growth of the Japanese economy. Investment will be based primarily on Japan’s economic strengths, such as its manufacturing industry (in particular on those parts of it that are demonstrating an ability to exploit newly emerging technology) and on sectors benefiting from structural change in the economy. Investment will be in directly held transferable securities. The fund may also invest in collective investment schemes, warrants and money market instruments.

View on Past Performance

The Japanese equity market made progress over the quarter, helped by evidence of relatively strong domestic economic growth, despite the volatile market conditions seen in the latter part of the period. Fund performance was slightly weaker than the broader market, however. We missed out on strong gains in the steel sector, although our exposure in the land transport sector was beneficial.

Future Expectations

We believe there are good reasons to be reasonably positive on the outlook on both a near-term and longer-term view. Japan is one of the world's key economic powers and its manufacturing companies are world leaders in several major industries. As such, Japan is ideally positioned to benefit from the industrialisation of the developing world. Nearer-term factors such as a favourable outlook for company profits are also cause for optimism. We are seeing signs of a recovery in Japanese consumerspending and we believe that a rise in wages and full-time employment levels will sustain this.Against this background, we are concentrating on companies with sustainable profits growth and with management teams focused on improving their company's efficiency. We believe our commitment to detailed company-specific research puts us in a strong position to make the most of the investment potential available.

Fund Details