FundInfo

Fund Objective
The principal investment objective is to achieve long term capital appreciation by investing, directly or indirectly, in companies located in the Far East (excluding Japan) or deriving a significant part of their income from that region. It will invest at least two thirds of its total assets in equity and equity linked securities (excluding convertible bonds and bonds with warrants) of companies that are incorporated under the laws of, and have their registered office in, a country in the Far East Region*, or that derive a predominant part of their economic activity from the Fast East Region, even if listed elsewhere. Equity exposure may be achieved through investment in shares and warrants on transferable securities.
Fund Manager
Mike Hanbury-Williams
Fund Manager Commentary
	Market review Asia was the best performing equity region over the quarter as the markets were perceived as insulated from the Europe’s sovereign debt crisis. However, markets reacted negatively to concerns over a slowing Global and Chinese economic outlook, as austerity packages and policy tightening have raised fears of sub-trend growth. Inflation has also picked up and whilst it is expected to peak soon, and within reasonable levels, being at the top end of expected ranges does create opportunity for scaremongering. Australia was the worst performing market over the period hit by weak currency, a sell-down of cyclical stocks (doubly so because of the Australian Resource Tax) and fears of weaker domestic economies. South East Asian markets proved the strongest on strong domestic economies and robust currencies Performance & Attribution The Fund underperformed its peer group benchmark over the quarter. Though the Fund benefitted from its overweight position in the South East Asian markets and underweight to resources and Australian banks, positions in technology were hit due to weaker demand expectations in Europe and potential rising wage costs. The portfolio also suffered from our exposure to Rexlot where a change in growth strategy disappointed the market, though we believe it will actually deliver stronger earnings numbers over the medium-term. A number of companies such as education business Educomp and software group Inspur continued disappoint and were subsequently sold. On the plus side the Fund benefited from positions in Lihir Gold, which was subject to a bid, Indonesian bank Mandiri and cosmetics group Woongjin Conway. Activity As regards purchases, we added packaging group Amcor following an attractive acquisition. We also added Malaysian energy group Tanaga on our positive macro view on the country, while Indonesian food group Indofood was added on the back of domestic consumption growth. Elsewhere, we sold Inspur and Educomp for the reasons mentioned previously. Mediatek was sold after a period of strong performance and we reduced our holding in Glorious Property on concerns over Chinese real estate. Outlook While markets have already discounted the fact that economic growth across Asia should remain solid in 2010, expectations of a stuttering recovery in the developed economies is now sharpening investors’ focus towards the region once again. There is further positive news in that factors such as the moderation of Chinese wage growth means that interest rate hikes are less of a threat as the rate of inflation across Asia levels out. We are reassured that Asian corporate balance sheets are robust after significant cost-cutting. This should help support capital expenditure programmes and encourage merger and acquisition activity and thus provide some support to the markets. That said, slower external demand is anticipated to pare back earnings estimates slightly and this, combined with the fact that the late summer months are traditionally slow on the back of thin company newsflow, may mean that market progress is muted in the short term. (text dated:30/06/2010)

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