The markets continued their strong upward trend during the third quarter. The Fund was able to post a strong absolute return over the period although slightly underperforming its benchmark the MSCI World Index.

Financials continued to drive this market, followed by Industrials and Materials. With financials performing so strongly, it is not surprising to see four financial companies in the top ten active contributors to the Fund. Prudential Financial, Goldman Sachs, a new holding Irish Life & Permanent all performed well over the quarter, while the leading active contributor in the whole Fund was National Australia Bank. National Australia Bank, a new purchase over the quarter, rallied on the general perceived strength of the Australian economy. The company replaced the Bank of Nova Scotia, one of Canada’s leading financial institutions in the Fund. Bank of Nova Scotia was bought for the stability it provided but it was decided that the upside to the price was not as attractive as the Australian bank. The Fund is still relatively neutral towards Financials, choosing to invest in quality, more stable names such as JPMorgan Chase and Goldman Sachs. Along with exiting Bank of Nova Scotia the Fund also looked to increase the beta of its holdings through purchasing SunTrust Banks. SunTrust Banks Inc is a super-regional bank holding company operating mainly down the southern east coast of the United States. We initiated a position on significant upside potential as management executes plan to return bank profitability.

Stock selection within Oil & Gas was strong over the quarter. One of the stronger performers, Tullow Oil was sold over the period on valuation grounds, having performed very strongly over the last few months. The Fund reduced the size of its position in the sector also due to the fact that the Fund manager became less convinced with the energy sector as a whole and decided to move money into higher conviction names.

The Fund’s underweight to Capital Goods detracted from the performance of the Fund. We began to increase exposure to the cyclical Capital Goods sector during the quarter through initiating in Siemens, BAE Systems and Tyco International. Tyco is a multi-national manufacturing and service providing company, active in healthcare, security, telecommunications and electronics. Attractively valued with rising revenue trends in ADT accounts, there is evidence of Tyco restoring operational health to this division; the company demonstrates economic resilience despite attrition in its construction customer base.

Disappointing, especially in September, was the digital wireless communications producer, Qualcomm. The stock was weak during as investors grew concerned that growth was slowing as there was no pre-announced upside to the MSM chipset guidance of 88-92mn for the September quarter. It is likely that the company will reset expectations in the coming weeks on its royalty revenue stream and therefore we exited out of the stock over the month, thereby reducing exposure to the technology sector.

We feel comfortable with the balance of the Fund between cyclical and non-cyclical stocks and will look to use any further strength between here and the end of year to take some profits. We believe 2010 will be a difficult period for the markets as the macro economic picture into 2010 remains unclear.