Downside risks to global economic growth have increased in recent months on the back of faster than expected slowing down in the Chinese economy. The Chinese do have some firepower through both fiscal and monetary policy means. Recent rate cuts and potential for further as inflation has declined, indicates the Chinese will support their economy if it worsens relative to their expectations of 7.5% growth for the year. While fixed investment is recovering, property related investment is expected to remain weak which may impact commodity prices in the short term. The US appears to be relatively better positioned than its European peers with the consumer potentially surprising on the upside. The bottoming of the housing market together with growth in real disposable income could see robust household expenditure in the coming years. The major uncertainty remains around the "fiscal cliff" which has the potential to push the US back into a recession in 2013, should there be no appropriate compromise and solution reached by the politicians. The introduction of QE3 will pump money into the system with financial markets and commodities potentially benefitting with no significant impact on the real economy. Europe remains under pressure and is unlikely to recover meaningfully with a mild recession anticipated for 2012.

In this low global economic growth environment the top quality Real Estate Investment Trusts (REITS) are increasingly benefiting from their competitive advantages and are therefore delivering stronger operational results and cash flows relative to their second and third tier peers. Amongst other these REITS are using their competitive advantage of being the preferred landlord for international retailers due to their premium locations to continue improving tenant mix and increasing rental. They are also using their ability to raise equity and debt capital at historic low costs due to investor demand for quality issuers and to utilize this capital for accretive acquisitions and extensions to their best located properties. Global REIT income yields remain very attractive relative to bond and cash yields and the Oasis Crescent Global Property Equity Fund continues to take advantage of these opportunities with the average cash flow yield of the fund at 6.3% and the dividend yield of 5.6% being extremely attractive relative to the average bond yield and inflation which has declined to 2.2%.

The global economy is slowing with growth anticipated at around 3.3% for the year. The US has been resilient and has showed signs of improving growth year to date. This has been on the back of improving domestic demand (rising employment, rising asset prices, etc) and robust industrial production. Europe is the major drag on global economic growth this year, anticipated to experience a mild recession. The financial crisis is resulting in significant public expenditure cuts while the consumer is under pressure due to rising unemployment and pressure on real disposable income. Developing markets have slowed in recent months, particularly China, impacted by weak exports and decline in infrastructure related growth. The Chinese authorities, who have been focused on controlling inflation over the past 2 years, have cut interest rates for the first time since 2008, signalling an intention to provide some support. However, the Chinese government has indicated that stimulus of the magnitude seen in 2008/9 will not be forthcoming. Downside risks have increased in recent months which points towards another round of quantitative easing in the near future. The potential break-up of the Euro and failure to effectively address the financial challenges of the European banks and sovereigns such as Spain, Greece, Italy and Portugal would have global ramifications, driving down global economic growth.

Due to the slowdown in global economic and employment growth, the recovery in property rentals has also slowed and the extent of rental growth has become very dependent on the fundamentals of specific markets including the quality of location and the supply and demand levels. However, commercial property supply in developed markets remain at very low levels and due to the lack of funding for developers, the supply is expected to remain low for a number of years which does provide an underpin for rentals. We are seeing an increase in the number and size of property loans that global banks need to extend or restructure and this should result in an increased level of property sales by banks and private investors to deleverage and with the balance sheets of REITS being strengthened substantially over the past five years they are at a significant advantage to the private sector to acquire properties at attractive and income enhancing yields. Global REIT income yields remain attractive relative to bond and cash yields and the Oasis Crescent Global Property Equity Fund continues to take advantage of these opportunities with the average cash flow yield of the fund at 6.7% and the dividend yield of 6.1% being extremely attractive relative to the average bond yield which has declined to 2.4% and inflation of 2.5%.

The slowing down of the global economy in recent months has contributed to economic growth forecasts being downgraded for 2011F and 2012F in the developed economies and some developing economies by the likes of the IMF and OECD. The unravelling of the Eurozone debt crisis has been a major contributor to this and will take some time to resolve as the implementation of the austerity measures and low consumer confidence will impact demand for products and services. The US has not taken as much strain as their European counterparts but faces a challenging few years ahead on the back of the rising government debt levels and high budget deficit. While politics has been a hindrance to effective decision making in both the US and Europe, implementation of austerity measures are a necessity and will impact economic growth over the next few years. The developing world, which has been the "engine of growth" for the global economy over the past few years, has slowed recently. China and India, the major economies of the developing world, do face some headwinds in the short term but should continue to deliver robust growth over the next few years.

We are now in the fourth year of a very low level of commercial property supply in developed markets and due to the limited availability of land and the extensive planning process in the major global cities as well as the lack of funding for developers, the supply is expected to remain low for a number of years. The recovery in rentals is slow but we are seeing a reduction in the level of incentives on new and renewal leases and some evidence of substantial rental uplift on leases that were concluded during the global financial crises in 2008. The core global cities and transport hubs continue to differentiate themselves in terms of stable activity and demand for space relative to a limited demand and a lagged recovery in secondary cities and locations.

We are entering the 2012 to 2013 period where we expect to see an increase in the number and size of property loans that global banks need to extend or restructure based on the high level of activity in the 2007 to 2008 vintage 5yr loans. This should result in global banks having to sell in excess of USD300bn of properties to deleverage and with the balance sheets of REITS being strengthened substantially they are at a significant advantage to the private sector to acquire properties at attractive and income enhancing yields. Listed REITS have raised GBP153bn of equity and bonds since February 2009 and in the US the average loan to value has reduced from the peak of close to 60% to the current level of 50%. The high quality REITS with strong balance sheets and direct access to funding also has a competitive advantage over REITS that are dependent on bank funding which will result in the high quality REITS being better positioned to take advantage of these opportunities and it will result in the strong getting stronger.

Global REITS income yields remain attractive relative to bond and cash yields and the Oasis Crescent Global Property Equity Fund continues to take advantage of these opportunities with the average cash flow yield of the fund at 7.1% and the dividend yield of 6.4% being extremely attractive relative to the average bond yield of 2.8% and inflation of 3.9%. Our preference remains to invest in REITS with assets in the major global cities and transport hubs, with strong balance sheets and direct access to the funding market and with experienced management teams. These high quality REITS are very well positioned to take advantage of opportunities that will present themselves over the next two years and this will further strengthen their competitive positioning and result in the strong getting stronger.

The global economic environment remains challenging with increased risks around the slowing down of the major developing economies in the short term. China has slowed significantly in recent months but has started to ease its monetary policy, which should continue in the year ahead. A faster than expected slowdown in China will have a negative impact on global economic growth and a ripple effect on commodity prices and risky assets globally. The US has gained some upward momentum with some of it being attributed to re-stocking. A better than expected recovery in the US consumer and the housing market will make a significant impact on US economic growth expectations for the year ahead. Europe remains in distress, albeit that the recent bailout packages have reduced the financial risk in the short term. The implementation of the austerity measures will impact economic growth in the region over the next few years. The global economy is therefore anticipated to grow at a slower rate in the year ahead than the average levels realized over the past decade.

Refinancing risk in the EU property market has reduced following the liquidity provided by the European Central Bank to the EU banking sector but the risk remains that funding could get tighter again as the impact of these liquidity injections reduce over time. We are now moving into the fifth year of a very low level of commercial property supply in developed markets and due to the limited availability of land and the extensive planning process in the major global cities as well as the lack of funding for developers, the supply is expected to remain low for a number of years. On average, rental growth is recovering slowly but the extent varies based on the quality of location and the supply and demand fundamentals in specific markets. We expect to see an increase in the number and size of property loans that global banks need to extend or restructure in 2012 and 2013 based on the high level of activity in the 2007 to 2008 vintage 5yr loans. This should result in an increased level of property sales by banks and private investors to deleverage and with the balance sheets of REITS being strengthened substantially over the past five years they are at a significant advantage to the private sector to acquire properties at attractive and income enhancing yields.

Global REIT income yields remain attractive relative to bond and cash yields and the Oasis Crescent Global Property Equity Fund continues to take advantage of these opportunities with the average cash flow yield of the fund at 6.6% and the dividend yield of 5.9% being extremely attractive relative to the average bond yield of 2.8% and inflation of 3.2%.