September proved to be a positive month for most risk assets, with equities posting the strongest absolute returns. The increasein risk appetite was largely driven by a more stable macro-economic backdrop. Data from the USA showed leading indicators improving, combined with convalescence in manufacturing and consumer activity, as confirmed by The Institute of Supply Management as well as retail sales data. This gave investors confidence that the spectre of deflation and double-dip has been averted, for the time being at least. Stronger data was also published across Western Europe. The Federal Reserve and Bank ofEngland's confirmed commitment to further monetary expansion (in order to defend against the rise of a negative growth environment should activity stall significantly) added to this confidence. The fund outperformed by 40 basis points. The main contributor was our overweight position in equities, where exposure remained between 67 and 69 percent during the month versus a 60% benchmark. It is interesting to note that the yield differential between equities and bonds remains extremely compelling across most major regional markets. Following a protracted period where one learnt to expect a reverse yield gap, it is now possible to invest in European and North American blue-chip companies with an earnings yield way in excess of that available from the long-dated government bond of that country. The hunt for income has also supported the property market over the month, and REITs also produced strong returns. The maturity of a Japanese yen denominated bond was actively not reinvested, creating a reduction in exposure to the currencyand further increasing our underweight relative position as we anticipate weakening of the currency following a rise of 11% against the US dollar this year. The expansion of the bank-loan program by ¥10 trillion and deepening concerns around the source of growth for the Japanese economy suggest a short-term correction is likely. We maintained our Emerging market currency exposure in Brazilian real, Indonesian rupiah, Korean won and the Philippine peso,as appreciation is expected thanks to both cyclical (strong growth, tightening monetary policy) and structural (convergence, favourable demographics) arguments. We sold our entire position in Microsoft on fears of competition from a number of smaller, more nimble competitors in key areas of cloud computing, mobile data and mobile communication. While the company is trying to diversify away from Windows, they have yet to have an impact of profits. Emerging market names continued to perform well, returning +14.1%. HTC Corporation was the main contributor, returning +28% for the month (Taiwanese designer, developer and manufacturer of handheld and wireless devices on Android operating systems and is part of our Data Obesity opportunity set), as did Asia (+11.8%) and Europe (+11.4%). North America, UK and Japan all underperformed. We continue to hold gold as an insurance against central bank policy error, but have resisted increasing our exposure just yet -we are concerned that liquidity may become problematic due to the huge positions dwarfing physical gold demand, which are being built up in exchange-traded tracking products. As we look forward into the last quarter of the year, we are hoping for confirmation that -on the ground -corporations are still witnessing a gradual recovery in activity which has been converted into double-digit earnings growth. We would also like to see that corporate management is beginning to become more confident to increase capital expenditure to drive future organic growth. This should easily be combined with progressive dividend growth, due to record levels of cash on corporate balance sheets across the Western world.

Markets were very polarised in June, with investors' only distinction seeming to be between risk and non-risk assets; furthermore, the negative correlation between government bonds and equities hit relative highs this month as US Government bonds posted their best start to the year for 15 years. We have discussed previously our belief that government bonds offer very little value, and we are positioned accordingly, although we have been remiss in our underestimation of the manner in which investors would flock to government bonds, despite the huge levels of government debt being the very point of concern for investors.

The portfolio underperformed relative to the composite benchmark in June, driven by the overweight exposure to equities. Despite broad equity market weakness, stock selection outperformed relative to the MSCI World Index.

Fixed income produced positive absolute, but negative relative returns versus the index. Government bonds produced positive absolute returns in the main regions, with the exception of Europe, a consequence of mounting concerns surrounding the debt crisis. Corporate spreads moved little during the period.

While we are still positive on real assets, we are sensitive to market sentiment. As such, we reduced our equity weightings during the month in order to neutralise our exposure. The proceeds have been left in cash and funded the small increase in allocation to fixed interest securities and alternatives, in particular, a purchase of Bluecrest Allblue, a high quality, liquid hedge fund, which serves to build in further diversification to the portfolio due to its low correlation to other risk assets.

We do still feel that equities are undervalued, supported by the fact that analyst consensus expects headline year-on-year earnings growth for the S&P 500 Index to come in at +26.5% for the coming Q2 earning's season. However, the market is concerned that the overwhelming debt burden will reduce global growth and destabilise the still fragile recovery. Investors are also grappling with the inflation/deflation debate; and (with data far from conclusive) markets can continue to be volatile. It is certainly true that economic data has shown a slowing of the strong growth thus far recorded, but in absolute terms it is still positive, particularly in manufacturing where data has remained especially strong. Turnover within the portfolio was very low over the period, with the only significant additions being Centrica, within our Security of Supply theme. Centrica sits in our opportunity set 'the need to procure energy from gas on demand' and exhibits a strong competitive advantage that is expected to improve.

Security of Supply was the top performing theme, with defensive, high quality names such as Fresenius, Peabody Energy, International Power and National Grid being strong contributors to performance.

National Grid, undertook a rights issue that we took up due to the large discount to an already cheap valuation. The company is expected to perform well in an environment of low interest rates which, are linked to their costs and also higher UK inflation, which is linked to their revenues.

Corporate Restructuring was the notable poor performer for the month, with weakness from Monster Worldwide, Home Depot and Weyerhaeuser as a result of poor US data for employment (ADP), housing starts, new home sales, GDP and consumer confidence affecting the outlook for the economy. While the data has been weaker than perhaps expected, economic growth continues to be positive in absolute terms and we retain exposure to these more cyclical businesses in the belief that a recovery in activity, albeit at a slower pace than first hoped, has become embedded. We remain positive on the longer-term outlook for equities. The uncertainty surrounding the funding issues of European banks, and indeed governments, are a headwind for markets at present. However, with the bank stress tests due to be published shortly, and the earnings season beginning in earnest next week, we may start to see the stability we require to begin rebuilding our equity weightings.

Risk assets continued to rally strongly in March with equity markets surpassing their February highs following a strong set of economic data. This included good employment and manufacturing numbers, positive business and consumer surveys and more recently, a strong durable goods order in the US implying that business confidence is returning as companies are increasing their capital expenditure. The market also took heart that the EU agreed on a "last resort" safety net for Greece in case of a threatened insolvency, and that the package would also involve the IMF. Interestingly, most major Government bond markets finished the month stronger and with credit spreads continuing to tighten on corporate debt, fixed interest investments provided a source of positive absolute returns for the portfolio.

Both the absolute and relative performance for March was positive with the portfolio outperforming the benchmark. Equities outperformed the equity index with fixed interest also outperforming the bond component of the composite index. Property produced a strong absolute performance mildly ahead of equities. Government bond markets finished the month in negative territory. However, the damage was largely offset by the continuance of credit spreads tightening on corporate debt. We continue with our policy to be overweight corporate bonds and short duration.

With regard to asset allocation, equities were increased to 69% from 59% of the portfolio by investing most of the 12% cash that was held at the start of the period. The fixed interest weighting was unchanged at 24%. Both the Property and Alternatives (Gold) exposure was maintained at 3.0% and 2.6% respectively.

Corporate Restructuring was by far the strongest theme over the period. Fiat, Citigroup and Monster Worldwide were up more than 18% as investors became increasingly confident about the economic recovery. This positive sentiment also favoured the more cyclical characteristics in our Pricing Power theme, with Steel, Energy and other Materials related names among the best performers. Pricing Power also performed strongly on a relative basis over the month. This was driven in part by our exposure to cyclicals, notably the airline stocks, through Delta Airlines. We see significant pricing improvements on limited capacity additions continuing.

Naturally in this environment, the more defensive, high quality characteristics of Strong get Stronger companies were a relative laggard, as were the higher multiple growth companies in Intellectual Property & Excellence, although it has been gratifying at last to see a good performance from Nintendo in this theme which announced plans to launch a new 3D consol and as a result, returned +26% over the month (45% over the quarter).

We added to Proctor & Gamble, IBM and Cisco and started new positions in McDonalds and France Telecom. All of these names exhibit attributes of our thematic profile of Strong get Stronger; companies with defensive growth characteristics, supported by very strong balance sheets and high cash flow generation; attributes that we believe will be rewarded by the market despite having lagged more recently.

Our thesis remains bullish, economies in recovery and market reasonably priced - 2010 consensus is currently for $79 of earnings on S&P 500, reflecting a multiple of 15x and inflation, so far, seems in check. We do have two specific nuances to this view: genuine growth stocks such as those on our Strong get Stronger and Intellectual Property & Excellence themes, although somewhat more expensive can sustain yet higher premiums. Cyclical and risk related companies, more akin to those in our Corporate Restructuring, and to some extent, our Pricing Power and Security of Supply themes, are compelling long term, but susceptible to sentiment swings hinged around the economic growth and perceived interest rate trajectories. In reality, longer term we remain less concerned about the latter issue and see interest rates remaining structurally lower for a prolonged period, but volatility in the sentiment provides.

We raised our exposure to equities this month taking the weighting to 64%. In turn, the cash exposure was brought back from 10.4% to 6.6%. Fixed Interest, Property and Alternative Asset weighting remained relatively flat during the month.

The relative out performance for the month can be largely attributed to our overweight position in the Pricing Power theme which was the second best performing theme for the month. Intellectual Property and Excellence (IP&E) and Corporate Restructuring also outperformed the benchmark. Additionally, continued spread tightening of corporate bonds allowed us to outperform the government bond market.
Within Pricing Power, the stand-out stock for the second consecutive month was US Steel. It returned 23% giving a 53% return over November and December and we believe there is still more earnings upside with capacity becoming tighter and with the recent very positive numbers on Ford's car sales. Across the Atlantic, European steel producer, ArcelorMittal also produced a strong return of 18%. BHP Billiton and Rio Tinto returned 6% and 8% respectively.

Materials was the best performing sector. This is unsurprising given the inclusion of the above four stocks, US Steel, ArcelorMittal, BHP Billiton and Rio Tinto, as well as Novozymes.

The gold price retreated about 8% from last month's highs of $1215. The Gold Bullion Securities and Barrick Gold fell accordingly, but we added Kinross Gold to the portfolio to take advantage of this price weakness. We continue to believe that gold should provide the opportunity for strong returns due to abundant liquidity prevailing, record low interest rates, negative sentiment towards the US$ and momentum trading.

We sold certain cyclical stocks including Bucyrus and Hartford Financial, and added to the traditionally higher quality, more defensive areas of the market which have lagged the rally buying companies such as IBM, Unilever, VF Corp, National Grid and Novartis. In addition, we also increased our Japanese exposure through Daikin Industries, an IP&E stock specialising in the manufacture of ductless air conditioning units.

We also purchased EADS for the IP&E theme and this returned a healthy 13%. A plethora of bad news surrounded the stock including an exposure to Dubai (a 3% shareholding and 4% of the near term Airbus order book), while concerns persisted over airline bankruptcies, and huge budget overruns of the fixed cost contract for the A400M military transport aircraft. Added to these resounding issues was the weakening US$ causing pressure on earnings as EADS is a company which derives most of its revenue in US$ whereas its cost is predominantly in Euros. By early December, we thought there was excessive pessimism priced into the stock and took a long position.