The Investor|17Fund Manager updatesSt. Jamess Place fund managers report on the last quarter and discuss the future for financial markets around the worldThe views expressed in these updates are the fund managers own and St. Jamess Place accepts no responsibility or liability for the information they contain18 | TheInvestor F U N D MA N A G E R U P D A T E MANAGE DF UNDSIt is nowa little over three years since the US sub-prime crisis broke, precipitating the global financial and economic crisis. The monetaryauthorities worldwide have taken unprecedented measures to prevent the incipientfinancial collapse generating a global economic slump, and yetit is clear that profound and as yet unresolved problems remain.The current difficulties in the eurozone stemfroma toxic combination of misplaced economic fundamentalism, grosslyinadequate institutional arrangements and a lack of politicalwill and coordination. Emerging economies persist in their mercantilist approach, artificially depressing the external value of their currencies and distorting the balance between the traded anddomestic sectors of their own economies. As their inflationarypressures mount, that may require an unexpectedly aggressive policy response. Moreover, the credibility of the monetaryauthorities themselves is coming under a degree of scrutinythat we have not seen for many years.Despite these structural problems, financial markets generallyhave been buoyed by the combination of lowinterest rates, quantitative easing and the notable ability of corporations to reorganise themselves to recover profitability, generate cash andprovide themselves with the financial strength to weather what is an uncertain global economic outlook. That ability has providedmany market participants with a considerable degree of comfortthat the corporate engine on which the financial markets are builtremains in robust good health, despite the excessive debt burdens in the background.In such a confusing and uncertain global scenario, longer term value may be less evident, especially with clear signs of excessive enthusiasmin areas such as the emerging markets and parts of the bond markets. Nevertheless, those entities that are capable of generating moderate but consistent levels of growth may seem unremarkable at present but, in an uncertain environment of subdued global economic activity, such characteristics maybecome increasingly appreciated, providing a measure of immunity fromthe global background. Our recent visits to the USand Japan confirmthat Pfizer and Secomare just such examples.GAMThe mercantilist stance adopted by emerging economies may require an aggressive policy responseAndrew Green The credibility of monetary authorities is coming under intense scrutinyAXA FramlingtonWe remain overweight in industrials and underweight in consumer-related stocksThe final quarter of 2010 was a mixed one for markets. Equities moved nervously higher, butbonds finally succumbed to concerns that inflation maybecome a bigger issue and thatyields will eventually rise to more normal levels. The economic data was satisfactory, with better than expected numbers fromGermanyand the UK, a steadier performance fromthe US, but sluggish activityin the rest of Europe. Despite the better tone, the US Federal Reserve was taking no risks with the recovery and announced another boutof quantitative easing.Closer to home, the Irish were forced to accept a bailout package fromthe European Central Bank and the International Monetary Fund, and there remain serious concerns about the future of the euro and thatother countries will need support. Company results continued to meetor exceed expectations. There were no significant changes in assetallocation during the quarter. We remained overweight in UKequities reflecting their good yield, modest earnings multiple, faster earnings growth and the dominance of international businesses with goodgrowth prospects. We added modestly to US equities as the recoveryshould be sustained and growth could actually be above trend nextyear. There has been little change in sector preferences where we remain overweight in industrials and underweight in consumer-relatedstocks. We have, however, added modestly to financials, specificallyUKproperty companies, which look undervalued. The European authorities have probably done enough in the very short termto reassure investors, but another attack on the structure of the euro is inevitable unless more is done to correct the structural imbalances in a number of the smaller economies.Globally there are conflicting influences in terms of policy, with China and other emerging economies tightening monetary conditions, while the US and probably Europe are injecting liquidity into the system. On balance, we believe this background favours equities over bonds over the mediumterm, while in the shorter termthis tends to be a seasonally strong period of the year for equities.Richard Peirson There are serious concerns over the future of the euroTheInvestor | 19The spending cuts, whichthe government hope will helpeliminate the UKs deficit, cast a significant shadowover the outlookheading into 2011.Higher taxes will also place more pressure onthe domestic consumer.Abackdropwhere unemployment remains elevated, wage growthmutedandthe housing marketweakis likely to result intoughconditions for consumer spending anda general lackof inflationary pressure after the one-off impact of Januarys VAThike. As such, we seea prolongedperiodof weakgrowth inthe UKeconomy.We believe, however, that the domestic equitymarket contains a number of high quality businesses, with durable earnings prospects that are profoundly undervalued. The quality growth companies, whose consistent earnings and dividend growth have historically seen them trade at a premiumto the market, have experienced what we believe to be an unwarranted de-rating. However, this represents an excellentopportunity to gain exposure to these businesses.Companies in sectors such as tobacco, pharmaceuticals, utilities andtelecoms are not overly exposed to discretionary consumer spending in the UK, with many experiencing rapid expansion in faster-growing overseas markets. They typically have strong balance sheets and the potential to maintain earnings and dividends even in a period of modesteconomic growth. Despite this earnings resilience, they are among the cheapest stocks in the market, so we hold a high level of conviction in the prospect for the portfolio.Invesco PerpetualNeil WoodfordThe domestic equity market contains many high quality firms that are undervaluedArtisanDan OKeefe and David SamraDespite macro uncertainty, many of our companies reported solid earnings progress Irelandwas at the centre of attentionthis quarter. Its banking systemis in dire straits withtoo muchdebt anddeclining asset values: the legacy of its property boom. The Irishgovernment continues to recapitalise the banks andguarantee their liabilities. Concernedwithrecorddeficits, investors have grownunwilling to fundthe governments borrowings.Just as they didwithGreece several months ago, the EuropeanUnion hadto organize a sovereignbailout to stabilise confidence inthe euro. Fears that SpainandPortugal might go inthe same directionalso grew. Despite macro uncertainty, many of our companies reportedsolidearnings progress during the quarter. Signet Jewelers continuedto outperformthe industry andwas well positionedfor the big holiday season. The companyreportedexcellent thirdquarter results as same-store sales rose more than7%, margins increasedandthe balance sheet remainedstrong.Experian, Microsoft, 3M, Mastercard, AmericanExpress, Novartis, Ryanair, ArchCapital andTyco Electronics also reportedgoodearnings.The economic recovery is bringing challenges inthe formof higher costs. Some of our consumer goods firms, including Sherwin-Williams, are facing rising rawmaterial prices, andrises inmarketing expenses are characteristic of big advertisers like Procter &Gamble, Unilever, Diageo andAmericanExpress. Some of these firms will be better thanothers atpassing throughprice rises to offset price pressure. If the economycontinues to improve, these issues will be overshadowedby volume growth. If not, inflationwill take its toll onearnings, whichwe feel is partof the insecurity embeddedinthe cheapvaluations of these businesses.The performance of global equity markets has been muted in recentmonths as concerns about a financial crisis in Ireland resurfacedand spread to other eurozone countries such as Portugal and Spain.In China, inflation began to rise. To counter this, the governmentraised interest rates despite much of it being due to higher food prices.At the moment, the market is heavily divided between those stocks that have an emerging market exposure and those that are dependenton the West, where growth rates are much lower.In our UKportfolio, we hold mining companies and stocks, such as Burberry and auto parts maker GKN, that have picked up a significantbenefit fromthe tailwind provided by emerging markets, especiallyChina. We think, however, it is prudent to have a balance between these types of stocks and others such as banks, where growth is lower but pessimistic expectations have knocked down valuations to a veryundemanding level. The banking sector has recently been affected byproblems in the Irish banking system. While it is true that UKbanks such as RBS and Lloyds have significant loan books in Ireland, these have already been substantially written down. We believe UKbanks, which have hugely re-capitalised in the past two years, should be able to withstand the crisis and continue to offer outstanding value.With interest rates near zero and bond yields very low, we believe equities are likely to be the most attractive asset class for savers. There are clearly risks, principally the ongoing uncertainties in the eurozone and the biggest concern of all, Chinese inflation. Although we need to watch China closely, we are optimistic that the country can sustain its growth and, along with a recovery in the US, continue to drive the global economy. Provided this happens, we believe equities can make significant further progress.JupiterIan McVeighUK banks should be able to withstand the crisis and continue to offer outstanding valuesuch as RBS and Lloyds have significant loan books in Ireland, these have already been substantially written down. We believe UKbanks, which have hugely re-capitalised in the past two years, should be able to withstand the crisis and continue to offer outstanding value.With interest rates near zero and bond yields very low, we believe equities are likely to be the most attractive asset class for savers. There are clearly risks, principally the ongoing uncertainties in the eurozone and the biggest concern of all, Chinese inflation. Although we need to watch China closely, we are optimistic that the country can sustain its growth and, along with a recovery in the US, continue to drive the global economy. Provided this happens, we believe equities can make significant further progress.20 | TheInvestor F U N D MA N A G E R U P D A T E MANAGE DF UNDSThe portfolio posted positive absolute and relative returns on a quarter to date basis (compared with the MSCI World Index benchmark), benefiting fromstock selections in eight out of ten sectors. Topcontributors to performance were industrial andmaterial companies, which experienced strong pre-order activity attributable to demand from developed countries such as Germany andemerging markets. Although orders have notyet materialised for some industrials, the sector has turned the corner, with positive performance for more than 80%of our industrial holdings.In materials, stocks like BASF, Methanex andBHP Billiton are showing double-digitgrowth, as the stocks benefit fromsupply-demand pressure. All of the portfolios energy holdings are in positive territory, with Thai Oilposting strong returns. Concerns about curtailing emissions have lessened demand for coal while increasing demand for diesel in Asia.Thai Oils refining business directly benefits fromthis trend.Other sectors in positive absolute territory included consumer discretionary, consumer staples, healthcare, information technologyand telecoms. Detracting frombetter performance were utilities (an underweight position in the fund portfolio) and financials.Our highly conservative market expectations have turned modestlyoptimistic, as we are seeing more mid- and late-cycle companies reporting growth. Still, we expect periods of volatility (precipitatedby good and bad news), reflecting a more traditional business cycle.Polaris (managing the SJP/Worldwide Life & Pension Managed Funds)Bernard R. Horn JrTop contributors to performance were industrial and material companies THS PartnersCato StonexTechnology is beginning to open up new hydrocarbon frontiers around the worldWe have two energy-relatedinvestment themes: newunconventionaloil andgas fields andhydrocarbons locatedinsafe parts of the world.Conventional oil production, that is oil fromtraditionalreservoirs, is declining inthe NorthSea, Alaska, Mexico andVenezuela. At the same time, demandworldwide for blackgold continues to grow, fuelledfurther inrecent years bythe needs of the rapidlydeveloping emerging markets. As a result, oilprices have risenten-foldsince late 1999, the year in which, ironically, The Economist proclaimedthe worldwas drowning inoil.All, however, is not doomandgloom. Technologyis opening upnewhydrocarbonfrontiers and, importantly, manyof these newenergysources are locatedinpoliticallystable parts of the world. Deeper drilling, beneathpreviouslyimpenetrable salt layers, is nowtaking place inBrazil, for example, andexplorationis underwayoff the coast of Greenland. Most significantly, the enormous reserves of oil outside of traditional reservoirs are starting to be tapped. In Canada, companies are extracting oil trappedinthe oil sands. Inthe US, hydraulic fracturing is allowing oil to be removedfrompreviouslyimpermeable rocks andshale; andinQatar, Royal DutchShell is transforming cheapnatural gas directlyinto synthetic diesel. We have bought shares inRepsol (Braziliandeepwater), Suncor (Canadianoilsands), HuskyEnergy(oil sands andoffshore Greenland) andRoyal Dutch Shell (gas-to-liquids technology). We also investedinTransocean, which operatedthe BPrig that explodedinthe Gulf. Whensentiment was poor, we pickedupshares at verycheapprices inbothBPandTransocean.The battle betweencontinuedeconomic uncertainty andsteadilyimproving company profits continuedinto the fourthquarter. Despite positive announcements fromindividual companies, economic fears, whichmost recently focusedonthe impact of the Irishbailout, causedsignificant volatility inequity markets. This typifies a year inwhichthe overall picture of increasingly positive company data has drivenequities higher, but where the market has beensubject to large swings in investor sentiment givencontinuedeconomic uncertainty.Despite this volatility, the majority of recent economic data has been positive. There have been upside surprises on a range of US and UK releases, with UKGDP growth between July and September showing the economy grewat twice the pace of consensus estimates.October brought the long-awaited Comprehensive Spending Review(CSR), which was well received by the market because many companyvaluations had already discounted its impact. While the CSRwill have negative implications for many firms, its release does at least provide some certainty, allowing companies to plan for the future.The hard-fought restructuring that businesses engaged in during the early stages of the recession means that many companies nowenjoyimproved balance sheets, streamlined costs and better cash generation. Evidence of this can be seen in continued improvements in margins and profits. However, current valuations continue to reflectshort-termheadwinds, ignoring long-termrecovery potential. We have been able to exploit these price inefficiencies to invest in undervalued, well-capitalised companies with significant upside potential. By doing this, we protect our capital if the economic environment deteriorates, but are poised to reap significant benefits as belowtrendprofits return to more normal levels.SchrodersKevin Murphy and Nick KirrageWe are investing in undervalued, well-capitalised firms with significant upside potentialTheInvestor | 21F U N D MA N A G E R U P D A T E S P E C I AL I S T F UNDSDespite significant gyrations surrounding the prospects for the weaker European economies and the future of the euro, the underlying economic data continues to improve as itshould with lowinterest rates and plenty of stimulus being unleashed. Our take on this is that the credit crisis punched a hole in the day-to-day operations of many companies, and much of the growth we are seeing today is the result of themreturning to more normal levels of activity.At the same time, the finances of many corporates are much stronger than they anticipated, courtesy of heavy cost cutting anddemand being better than feared. Deployment of this financialstrength could be positive for share prices whether it is via higher dividends, share buy-backs or acquisitions. The imponderables are when? and howmuch?. Understandably, companies have remained cautious after events of the past 24 months, but we expect this to change. To be clear, we are not advocating a return to imprudent finances, but it is within managements power to be more generous to shareholders and restore the reputation of equities after ten years of forgettable returns.In sharp contrast, in many instances it is government finances that are the problem. To the extent that there has been a recovery in profits, there may be scope for the combination of tax revenues andlower spending to provide an improving picture, albeit there is a long way to go. The UKeconomy is looking more encouraging than many had feared, and maybe the correct balance between austerityand growth has been found.We are sanguine about the economic outlook. In particular, the saving of the euro will only come about because it looks set to fail; this brinkmanship will lead to bouts of macro angst in markets.We are most interested in the quality companies discarded in the rush to maximise returns fromthe recovery. These companies attract plaudits such as dull, no catalyst, and not growing fastenough, yet the valuation of their stable, long-horizon cash flows is the best that we can remember.ArtemisIn the UK economy, the correct balance between austerity and growth may have been foundAdrian Frost and Adrian GosdenAberdeen Asset Management Asia Asias growth potential remains strong and fundamentals are soundAsian equities have held upwell in recent months, despite renewed global jitters over European sovereign debt, Chinas monetary policy tightening andmilitary conflict between the two Koreas. Signs of continuedgrowth in regional economies, in addition to the US Federal Reserves latest bout of quantitative easing, have supported equity markets. Heightened inflation risks, however, are leading to tighter monetary policy, while rising capital inflows have seen countries step up intervention to rein in currency appreciation.The dilemma for policymakers is howfast they should move.Central banks have continued to prefer controls on credit and bankreserves to outright interest rate hikes, partly to avoid attracting hotmoney and partly because inflation pressures fromfood and energymay prove temporary. If demand in the West slows, Asias trade-ledeconomies will see moderate growth. Thankfully, their dependence is falling because of rising demand at home.The exception to all this is debt-ridden Japan, which faces a nowfamiliar structural problemof a shrinking workforce, rising dependencyratio and weak spending. Third quarter GDP expanded by more than expected, but growth there is fading as the strong yen anddeflation persist.Still, long-terminvestors can be assured that Asias growth potential remains strong and fundamentals are sound. Companyearnings have proved resilient and balance sheets look sturdy, while valuations are reasonable. Taking all this into account, we remain sanguine about Asias prospects.Signs of continued growth in regional economies have supported equity markets The nances of many corporates are stronger than they anticipatedHugh Young22 | TheInvestor F U N D MA N A G E R U P D A T E S P E C I AL I S T F UNDSBabson CapitalZak Summerscale and Jill Fields We believe that periods of higher volatility present better buying opportunitiesThe St. Jamess Place International Corporate BondFundpostedanother quarter of positive returns as the fixedincome markets benefitedfrom improvedinvestor sentiment. Althoughcertainmeasures, suchas the elevatedunemployment rate, are limitingthe overall growthof the globaleconomy, corporations have shownsustainedfundamental improvement, andcorporate profitabilitycontinues tostrengthen. Historically, fixedincome markets have performedwell insuchenvironments. As typicalwitheconomic recoveries, the reboundwill encounter bumps alongthe way, but the general economic trendis positive.Most recently, Europeansovereigndebt concerns returned, resulting in a bailout of Ireland. These macroeconomic events have, andwill result in, periods of increasedvolatility, typicallyleading to lower secondaryprices.Thoughmindful of potential macroeconomic events andthe eurozone situation, we generallybelieve that these periods of higher volatilitypresent better buyingopportunities.We expect tosee a continuedhigh level of issuance across the senior securedasset class, offering investors more resilience againstbroader macroheadwinds, where theyoccur.BlackRockMark Lyttleton and Nick OsborneThe portfolio has chosen to retain high levels of gross and net exposureEquities continuedtorecover over the quarter, althoughvolatilityremained. Markets were dominatedbysovereignconcerns inthe European periphery, policytighteninginChina andfurther fiscal andmonetarystimulus inthe US. Consequentlycommodities andstocks performedstronglywhile some government bondmarkets were notablyweak.TheUSFederal Reserves decisiontoexpandits holdings of long-term Treasuries by$600bnbrought aninitial market rallyinOctober, but theriskof contagionfromIrelandandtwohikes intherequiredreserveratiobythe Peoples Bankof Chinamarkedlyincreasedriskaversion. Economicdatain theUS, core EuropeandtheUKweregenerallysupportive. IntheUS, thirdquarter GDPgrewat 2.5%annualised, upfrom1.7%inquarter two.Thebusiness climateandexpectations components of theGerman IFOindex(aleadingindicator for economicactivityinGermany) printedrecordhighs.The portfoliohas retainedhighlevels of gross andnet exposure givenstrongcorporate balance sheets, the likelihoodof continuedearnings growthandcompellingequityvaluations relative toother asset classes. While recognising the risks, we are comfortedbyaccelerating global growthandeffective policyresponse.AXA FramlingtonGeorge LuckraftThe UK economy continued to surprise with the strength of its recoveryEconomic growthcontinuedinthe fourthquarter, withsome of the data suggesting that the soft patchseenat the endof the summer was temporary, rather thanpresaging a double-diprecession. The data was sufficientlyweakto persuade the US Federal Reserve to embarkona secondstage of quantitative easing.Inthe eurozone, the problems for peripherynations continued. After the earlier bailout of Greece, attentionturnedtoIrelandwhere the scale of its banks losses was sobigthat it endangeredthe countrys credit-worthiness. Debt spreads against Germanyballooned, especiallyafter Angela Merkel suggestedthat bond-holders inIrishbanks wouldhave toshare the pain. Another Europeanbailout ensued.The UKeconomycontinuedto surprise withthe strengthof its recovery. UKmanufacturing is seeing a strong reboundwithits competitive positionstrengthenedfollowing the fall insterling over the last two years. Equities have beensupportedbycontinuedprogress inearnings.The former corporate balance sheets are strong andmanagements are gaining confidence to undertake acquisitions.This has helpedsentiment. The strong balance sheets are helping dividendincreases andthe returnto dividendpayments bycompanies that were forcedto cut payments inthe financial crisis.BlackRockNico MaraisOur proprietary risk indicator has risen, reflecting a better global economic outlook Riskassets ralliedinOctober as investors anticipatedthesecondroundof USquantitativeeasing. However, increasedinflationexpectations resultedina depreciationof thedollar intheearlypart of thequarter. InNovember theUSFederal Reservevotedtopurchase$600bnof Treasurysecurities bytheendof 2011s secondquarter. Together withreinvestedmortgagepaydowns, total purchases will be$900bn. TheFeddowngradedtheUSgrowthforecasts from3.5%to2.5%. Commodities pushedhigher as astore of valueagainst thefallingdollar, inflationandpotential policymistakes.TheComprehensiveSpendingReviewintheUKlaidout wherespending cuts wouldfall. Thetransient natureof earlier fiscal stimuli is likelyto bemanifestedover thecomingmonths andtheabilityof therealeconomytocopewiththis couldbeakeydriver of futuremacro surprises. AnexceptioncamefromtheUS, whichannouncedan extensionof theBush-erataxcuts. However, global bondmarkets cameunder severepressureas investors concerns grewabout therisingUSbudget deficit. This rapidlychangingmarketenvironment shows theimportanceof flexibilityina portfolios asset allocation. Our proprietaryriskindicator has risensincelast quarter, reflecting improvedprospects for theglobal economycomparedwithlevels seena year ago.TheInvestor | 23Burgundy Asset Management Kenneth A. Broekaert There are many reasons why we have added to our holding in GlaxoSmithKlineAt Burgundy, we buycompanies that trade at market prices significantlybelowour estimates of their intrinsic values, andaimtobenefit as theyrise towards those values. We alsoseekcompanies that have a highlikelihoodof growingtheir intrinsic values over time via strongcashflowstreams thatare likelytogrowwell intothe future and/or management that is especiallyadept at investingthe capital andcashflows at attractive rates of return.It is against this backdropthat the CEOof one of our investments, AndrewWittyat GlaxoSmithKline, stands out. We have beenobserving himsince he became CEOinMay2008, includinga recent in-person meeting, andour convictioninhimcontinues togrow.He appears tobe excellent at managingthe core operations of the business andshows all indications of beingdisciplined, astute andopportunistic at capital allocation.While there are manyunknowns inpharmaceuticals, at Glaxo the combinationof anundemandingvaluationof about 10times earnings witha dividendyieldof about 5%, a resilientunderlyingbusiness withseveral dominant assets that do not have the unpredictabilityof patenteddrugs or the same payor pressures, anda rational capital allocator to invest the companys significant R&Dresources andcash flows intelligently, have ledus toaddtoour holding this quarter.Invesco PerpetualPaul Read and Paul Causer Despite recent weakness, we still believe banks are one of the most attractive areasMarkets are likelytosee further bouts of volatilityinthe short term.However, while the focus remains ongovernments withexcessive debtlevels, it shouldbe rememberedthat there are reasons tobe positive inthe current lowgrowth, lowinterest rate environment. Corporate balance sheets remaingenerallystrong, sections of the market are reasonablyattractive andthere is continueddemandfor the asset class frominvestors.Despite their recent weakness, we still thinkbanks are one of the mostattractive areas, particularly the larger northernEuropeanbanks. The combinationof structural reform, conservative interpretations of Basel III andrising capital levels will be a powerful support for subordinatedbankdebt for years. Aggregate yields onthis type of debt still offer real value.Outside of financials, we continue to see value inhigher yielding investment-grade names andinbetter qualityhigh-yieldissuers. The aggregate yieldonsterling BBB-ratedcorporate bonds was backabove 6% at the endof November. Inhighyield, manycredits still offer double-digit yields.Accordingly, we believe that corporate bondmarkets shouldcontinue to deliver a relatively attractive level of income.Invista Real EstateDuncan OwenThe St. Jamess Place portfolios are now well positioned for two key reasonsThe pace of recoveryinUKcommercial propertymarket values has slowed, withaverage capital values at 15.9%above the market lowinJuly2009. The St. Jamess Place propertyfunds have benefitedthroughhaving goodqualityunderlying propertyandanabove average income return, whichhas inturncontributedto strong total returns relative to their peer group, Investment PropertyDatabankbenchmark.Over the 12 months toSeptember 2010, the Life andPensionFundproduceda total returnof 25%versus its benchmarkof 20.4%, withthe AuthorisedPropertyUnit Trust producinga total returnof 23.4%versus its benchmarkof 21.6%. The St. Jamess Place portfolios are well positionedfor twokeyreasons. Firstly, the portfolios offer secure andwell diversifiedincome, witha lowvacancyrate of 6.2%for the Life andPensionportfolios and2.9%for the APUT, comparedwiththe benchmarkof 8.5%. Also, the portfolios have anabove average lease lengthcomparedtothe benchmark.Secondly, the funds have above average cash weightings to take advantage of a rising supplyof investments frombanks andother forcedsellers. The funds have recentlyacquiredproperties that have beenunder managed, offering significant scope for value enhancement throughasset management.First StateJonathan Asante We are increasing our exposure to telecoms companies offering attractive yieldsWe believe that emerging markets couldbe heading for a bubble as a result of the veryloose monetarypolicyof central banks, following the announcement of another roundof quantitative easing bythe US FederalReserve. The conditions for a bubble are inplace, withthe moneyprintedinthe West likelyto findits wayinto emerging markets, as investors chase the perceivedhigher returns onoffer.However, inflationarypressures are building across the asset class with significant rises inthe prices of goods andservices, as well as asset prices inIndia. Inflationis also picking upinChina.Some argue that emerging markets are not overvalued, but manyof the biggest names inthe global emerging markets index are companies of questionable quality. Whenyoustripthese out andlookat the valuation multiples of the highest qualitycompanies, theyappear expensive.We are increasing our exposure to telecoms companies offering attractive yields, andcutting our weighting to highlyratedconsumer names. Inthe telecoms sector, we like Polands TPSA as concerns about regulationare alreadyreflectedinthe price.We are also focusing oncertainstocks inthe ITsector where valuations are less heated, suchas LGElectronics andQuanta Computer.24 | TheInvestor F U N D MA N A G E R U P D A T E S P E C I AL I S T F UNDSJ O Hambro Capital ManagementJohn Wood Consumer demand remains depressed, so it is hard for firms to grow sales volumesThe UKeconomyhas entereda periodof stagflation, namelyaneconomic landscape characterisedbylowor negligible growthandhighinflation.Withconsumers remainingheavilyindebted, consumer demandwillremaindepressed, makingit verydifficult for companies togrowtheir sales volumes over the next fewyears. Inthis lowgrowth, highinflation world, the companies that will succeedwill be those that cancommandpricingpower withintheir industry, enablingthemtofullypass onhigher costs inthe formof higher prices, without losingmarket share.Tothat end, we currentlyfavour utilityfirms suchas National GridandPennon, consumer staples stocks suchas BritishAmericanTobaccoandUnilever, andcompanies suchas caterer Compass Groupthat have index-linkedpricingclauses withinclient contracts. We alsolookfor companies that canexpandtheir product mixtocreate this pricingpower, with pharmaceutical companySmith&Nephewanexample of a firminvestinginresearchtodevelopproducts thatwill enjoya powerful pricingedge. Withstrong balance sheets, these firms canreinvest inthemselves togenerate compoundinggrowth, soshouldbe able toaddvalue for equityholders irrespective of whether the UKeconomyachieves meaningful growth incomingyears, or, more likely, growthhas more of a grindingquality.Oldfield PartnersRichard OldfieldWe do not depend on the yen becoming weaker, but it would not be a surpriseOur bottomup, research-drivenapproachsuggestedthat, for most of 2010, reasonable companies couldbe purchasedfor veryreasonable valuations. Relative andabsolute valuations nudgedour focus towards larger global companies, as investor apathytowards equities for the firsthalf of the year manifesteditself inundemandingvaluationmultiples and, insome cases, dividendyields that exceededbondyields bya wide margin.Anapparent respite fromEuropeansovereignwoes, a returntostasis inAmericanpolitical circles andanother opportunityat monetarystimulus bythe USFederal Reserve cascadedintoanaggressive rallyinglobalequities, andwe have beenthere for most of the upswing. Solidperformance has beengeneratedina varietyof names fromPioneer Resources inenergytoLibertyInteractive inretailing. Our goalremains togenerate competitive returns inupmarkets andoutperformindownmarkets, and, withone exceptionin 2008, we have deliveredonour goals for the longrun.We have a mixof what we call economicallyoffensive anddefensive names that have different catalysts to realise value andgoodannual performance is dependentuponenoughof themmaturingduring2011.Liberty Square Asset Management Peg McGetrick European companies now find themselves with unusually low levels of debt Sovereignriskcontinues to worryinvestors, but we take comfort inthe prevailing rude healthof corporate balance sheets. Corporate spending in all areas was cut backmore rapidlythroughthis cycle thaninpreceding cycles. Europeancompanies nowhave unusuallylowlevels of debt with balance sheet gearing at a fifteen-year low. Inaggregate, European corporates are expectedto generate 325bnof surplus cashinthe nextfewyears, representing a free cashflowyieldof over 8%by2012.With credit markets functioning well, credit available at very lowrates and minimal returns fromcash reserves, firms are increasinglycompelled to invest their surplus cash. There are three ways to do this:mergers and acquisitions, buy-backs and/or dividends, and internalcapital investment programmes. We anticipate all three strategies to gain favour in the near term.As confidence grows, managements are beginning to make increasingly bold investment decisions. This is a basis for optimism. Growing dividend payouts will enhance the yield of our portfolio; mergers and acquisitions will underpin valuations in small-to-mediumcompanies; and rising capitalinvestment will drive earnings growth within the portfolio over the longer term.Reed, Conner & Birdwell Jeffrey BronchickIn the aggressive rally in global equities, we have been there for most of the upswingGoldis all the rage, andwe are nervous of this. Inreal terms the price of goldis higher thanit has beenat anytime since the spike inthe early1980s. Anyone nowenthusingfor the first time about goldis indanger of beinga Johnny-come-lately. We are ambivalent about golditself at this level: well aware that it is expensive andpossiblyover popular, but also that central banks are busyprintingandthat currencies are inwhat has beencalleda race tothe bottomor anuglycontest.Givenall the monetaryshenanigans of the past twoyears andthe continuinglarge uncertainties, goldis a useful insurance, andBarrickGolditself happens tobe intrinsicallyattractive at anythingclose to the current goldprice. The wayinwhichmanyof the leading Japanese companies withlarge international sales have dealtwiththe strengthof the yenhas beenimpressive. The profits of CanonandFanuc have grownsharplyover the past year in spite of the yen. If, as inthis last month, there were a whiff of yenweakness, that wouldprovide a tremendous fillipto these Japanese companies operatingperformance andshare prices. We donot dependonthe yenbecomingweaker the four Japanese holdings are eachattractive inanycase but it wouldnot be a surprise, andit wouldhelp.TheInvestor | 25S. W. Mitchell Capital Stuart MitchellEuropean shares are good value, trading on some ten times prospective earningsThe slowing of growthcontinuedacross most of the developedworldthis quarter, althoughsigns of a reboundinmid-2011 are starting to appear.Global inflationvolatilityremains highandrisks of deflationpersist as a result of the global output gap, but are offset byrenewedquantitative easing. Risks are shifting onto sovereignbalance sheets inmanycountries.Going forward, we believe volatilityinthe markets will remain, as there are questions over the efficacyof policyresponse. Inthe US, althoughthe economyhas beenslowing throughthe secondhalf of 2010, there are nowsignals that it couldstart to stabilise during mid-2011. We see housing weakness re-emerging. Private sector deleveraging continues to be an inhibitor for the growthof the economyandgovernment stimulus is set to fade. Europe, despite continuedfocus onsovereignsolvencyof peripheraleurozone countries, is continuing to recover, partlydriven bystrong export demandfromAsia andpartlybystrong domestic demandwithinGermany. As domestic demandrecovers andconsumer confidence improves, it looks more hopeful that the recoveryis sustainable. Inthe UK we see a weakening inhouse prices, fiscal tightening andcontinuedcontractionincredit, all increasing the riskthat the MonetaryPolicyCommittee will addto quantitative easing.Wellington ManagementPaul Grainger and Haluk SoykanThere are signals that the US economy could start to stabilise during mid-2011Webelievethat Europeanequities areveryattractivelypriced, with avibrant corporatesector generatingbetter thanexpectedearnings.Demandfromtheemergingworldcontinues togrowvigorouslyandeconomicgrowthfromthemature economies, furthermore, appears to berecoveringstrongly. TheEuropeanexport sector has alsoreceivedan extraboost fromtheeuros weakness. Companymanagements have generallydisplayeddiscipline, withcost control remainingapriority.This mixof recoveringrevenues andtight cost control has drivenmargins andreturns oncapital backtolevels seenbeforethecrisis tookhold.European shares are good value, trading on some ten times prospective earnings. European markets also continue to trade at significant discounts to the US market, despite their corporate sectors being just as profitable.Nevertheless, following on fromsovereign jitters, we drawa clear distinction between business andeconomic conditions in the southern periphery of the eurozone, labouring under the burden of higher coststructures, and its northern core tier. For the south (roughly Greece through Portugal), currencydevaluation is not an option and it will see relative deflation. However, the northern tier has the prospect of rather better growth rates.RWC Partners Nick PurvesWe think investors are overlooking some high quality, cash generative businessesAlthoughthe market has producedpositive returns inthe quarter with relativelyhighvolatility, there has beena divergence inperformance betweenthose companies exposedtothe rapidlygrowingemerging economies (miners, energyandindustrials) andthose exposedtothe lower growthdevelopedmarkets (consumer cyclicals andfinancials).The St. Jamess Place EquityIncome Fundis underweight infirms most exposedtothe emergingmarkets, as we feel these shares are highlyvaluedat a time whenprofitabilityis alreadyveryhigh. We have always believedthat startingvaluation(andnot the growthoutlook) is the bestpredictor of future returns. Withthis inmind, we feel that investors todayare overlookingsome highquality, cashgenerative businesses that are beingpricedat lowmultiples of sustainable earnings. Whereas UK government bondyields are around3%, some of the best known firms inhealthcare, telecoms, oil andlife assurance canbe bought onequityfree cashflowyields of 10%or more anddividendyields of around5%(GlaxoSmithKline, Vodafone, Royal &SunAlliance, AstraZeneca, Legal &General).Our approachis intellectuallyrobust and, if appliedina disciplinedandconsistent manner, shouldgenerate attractive absolute andrelative investment returns. This has beenthe case over the past tenyears, withthe fundgenerating anabsolute returnof over 100%net of fees.RWC PartnersJohn InnesThe UKs economic growth numbers are coming in better than expectedThe St. Jamess Place UKGrowthFundcontinues to findopportunities inUKequities, withanemphasis onthose companies benefiting from goodglobal growthrather thanthe more mutedeconomic environmentinthe UK. Economic growthis still verystrong inthe developing economies, infact arguablytoo strong, andthe monetaryauthorities are continuing to tighten, albeit fromlowlevels of interest rates.Their problem, however, is that the US is committedto a very loose monetary policy and, if they want to maintaincontrolledexchange rates, they must accept a higher level of inflationthanthey wouldlike.Fromreading the news about Irelandandother eurozone countries, observers may thinkEurope was indeeprecession, but that wouldbe to miss the muchstronger story coming fromcore Europe, especially Germany. Eventhe UKs economic growth numbers are coming inbetter thanexpected.Wheninvestors finally realise that the maindanger comes frominflationrather thanrecession, the recent buyers of 3% gilts, 0.75%Coca Cola bonds andall the other so-calledrisk-off assets will have to turntheir focus to attractivelypriced, but perhaps more volatile, participants inthe globalgrowthstory that are equities. The fundtherefore continues to remainfully investedwitha clear bias to global cyclicals andfinancials.A S S E T A L L OC A T I ON MANAGE DF UNDSMAIN HOLDINGSKEY MAIN HOLDINGS KEYMAIN HOLDINGS KEYMAIN HOLDINGS KEYFor more details on these funds, contact your St. Jamess Place PartnerKEY26 | TheInvestor UK Equity41.6% Pacific ex Japan 4.2%N. America12.4% Cash&Fixed 22.5%Japan3.5% Emerging Mkts 4.5%Europe 11.3%1. AXAFramlington EmergingMkts Acc 2.Treasury 2.5%IL 16Apr 20203. German Govt Bond 4%04 Jan 20374. Treasury 4%07 Sept 2016 5. HSBCHoldings Plc6. Treasury 4.75%07 Mar 20207. Rio Tinto Plc 8. BHP Billiton Plc 9. GlaxoSmithKline Plc 10. Treasury 2.5%IL 26 Jul 2016SJP/AXA FRAMLINGTON LIFE & PENSION MANAGED FUNDSAsset allocation as at December 2010Interest1. Jupiter EuropeanFund2. Jupiter EmergingEuropean 3. UK4.5%20134. UKTreasury 5%20125. KFW5.125%20116. UK3.25%20117. EuroInv Bank 5.375%20118. UK4.25%20119. Vodafone GroupPlc10. HSBCHoldings PlcSJP/JUPITER LIFE & PENSION MANAGED FUNDSUK Equities39.4% Cash & Fixed Europe 15.2%Interest45.4%SJP/GAM LIFE & PENSION MANAGED FUNDSUK Equities39.5% Pacific ex Japan 0.7%N. America18.9% Cash&Fixed7.4%Japan24.8% Emerging Mkts 1.4%Europe 7.3%1. BT Group Plc2. SumitomoMitsui Financial GroupInc 3. Aviva Plc 4. Rsa Insurance Group Plc5. Pfizer6. Pearson Plc 7. GlaxoSmithKline Plc8. Nomura Hldg Inc9. Sara Lee Corp10. J Sainsbury Plc Asset allocation as at December 2010InterestUK Equities41.5% Pacific ex Japan 2.4%N. America11.5% Cash&Fixed22.9%Japan3.5% Emerging Mkts 4.0%Europe 14.2%1. SPDR S&P 500 Etf TrUnit Ser 12. GlaxoSmithKline Plc 3. AstraZeneca Plc4. Brit American Tobacco Plc 5. Invesco Perp Income6. Imperial Tobacco Group Plc 7.Vodafone Group Plc8. UK 3.75%07-Sep-20209. BG Group10. BT GroupSJP/INVESCO PERPETUAL LIFE & PENSION MANAGED FUNDSInterestAsset allocation as at December 2010Asset allocation as at December 2010MAIN HOLDINGS KEYMAIN HOLDINGS KEYMAIN HOLDINGS KEYMAIN HOLDINGS KEYTheInvestor | 27SJP/GLOBAL LIFE & PENSION MANAGED FUNDS1. Signet Jewelers Ltd 2. ExperianPlc 3. MarshandMcLennan Companies Inc 4. TycoElectronics Ltd 5. ArchCapital GroupLtd 6. Bank of NewYorkMellonCorp7. AmericanExpress Co 8. Johnson&Johnson 9. Unilever Plc Dr10. Wal-MartAsset allocation as at December 20101. Thai Oil 2. Smurfit Kappa GroupPlc 3. Brooks Aut4. Webster Financial Corp5. Methanex Corp6. WescoIntl7. Andritz AG 8. Bellway Plc 9. Wincor Nixdorf AG 10. BHPBillitonPlc Dr SJP/WORLDWIDE LIFE & PENSION MANAGED FUNDS1. GlaxoSmithKline Plc 2. AstraZeneca Plc 3. Vodafone Group Plc4. Lloyds Group5. Legal & General Group Plc 6. Taylor Wimpey7. Barclays8. Royal Bank of Scotland9. Resolution10. Old Mutual Plc SJP/SCHRODER LIFE & PENSION MANAGED FUNDSAsset allocation as at December 2010UK Equities36.7% Pacific ex Japan 6.7%N. America11.7% Cash&Fixed28.1%Japan3.3%Europe 13.5%Interest1. SNC-Lavalin Group Inc 2. Hutchison Whampoa Ltd 3. Newcrest Mining Ltd 4. Royal Dutch Shell Plc B5. Vodafone Group Plc 6. Experian Plc 7. Nestle SA8. Intel Corp9. HSBC Holdings Plc 10. News CorpSJP/THSP LIFE & PENSION MANAGED FUNDSAsset allocation as at December 2010UK Equities16.2% Pacific ex Japan 8.1%N. America26.3% Cash&Fixed1.8%Japan1.7% Emerging Mkts 2.4%Europe 40.9% Other2.6%InterestAsset allocation as at December 2010UK Equities7.3% Cash&Fixed2.9%N. America34.8% Emerging Mkts 8.1%Japan9.2% Other2.6%Europe 35.1%InterestUK Equities11.3% Pacific ex Japan1.7%N. America36.4% Cash&Fixed6.4%Japan4.9% Other8.2%Europe 31.1%Interest28 | TheInvestor St. Jamess Place Life FundsDec 09 Dec 08 Dec 07 Dec 06 Dec 05Dec 10 Dec 09 Dec 08 Dec 07 Dec 06MANAGED FUNDS Launch date %changeAXA Framlington 07/06 13.1 19.5 -18.2 5.9 -GAM 04/00 11.5 14.6 -20.3 -1.4 9.7Invesco Perpetual101/92 9.0 10.6 -9.6 5.7 12.1Jupiter Cautious 01/07 11.5 20.0 -19.4 - -Global Managed1507/06 12.1 14.6 -24.3 12.8 -Schroder 09/96 9.2 21.0 -15.7 3.1 10.7THSP 01/92 6.9 16.0 -16.9 9.8 9.3Worldwide Polaris 01/07 21.4 23.7 -26.9 - -SPECIALIST FUNDSAlternative Assets BlackRock 08/08 6.5 13.8 - - -Continental European7SW Mitchell 01/92 20.2 14.5 -20.9 6.8 15.7Corporate Bond11InvescoPerpetual 04/03 9.3 32.3 -20.1 -0.1 -1.8Deposit1001/92 -1.0 -0.8 2.8 3.0 2.4AXA Framlington10/07 18.3 29.9 -37.4 - -Ethical4Aberdeen 11/98 11.8 27.5 -20.8 8.4 12.4Far East 1Aberdeen 01/92 23.5 31.3 -17.2 14.0 4.2Gilts5Wellington Management 01/92 4.9 -3.3 8.4 2.2 -2.5High Octane12 Oldfeld Partners04/08 20.1 12.0 - - -Investment Grade Corp BdInvescoPerpetual 03/09 5.0 - - - -North American8RCB 01/92 14.7 29.8 -21.8 -10.2 2.9Property Invista 04/04 9.9 2.7 -24.2 -11.0 13.5UK Equity1InvescoPerpetual 01/92 9.7 11.5 -15.5 6.2 19.5UK GrowthRWC Partners10/07 17.9 29.8 -33.0 - -DISTRIBUTIONFUNDSCautious Distribution Jupiter 04/08 11.5 19.9 - - -Corporate Bond Distribution11InvescoPerpetual 04/04 9.5 32.3 -20.6 0.6 -1.6DiversiedIncomeDistribution AXA Framlington 10/07 18.4 29.8 -37.3 - -Equity Income Distribution14 RWC Partners04/07 11.0 31.3 -26.7 - -Income Distribution2InvescoPerpetual 02/93 9.6 9.5 -14.0 5.6 19.8Investment Grade Corp Bd DistInvescoPerpetual 03/09 5.1 - - - -Property Distribution Invista 04/04 10.0 3.1 -23.9 -11.0 13.4Cumulative performanceYTD 3Yr 5Yr 10Yr AGR*%change13.1 10.5 - - 4.911.5 1.9 10.2 71.7 5.69.0 9.0 29.0 43.1 3.611.5 7.8 - - 3.212.1 -2.8 - - 3.29.2 11.4 27.0 40.7 3.56.9 3.0 23.5 54.8 4.521.4 9.7 - - 0.76.5 - - - 5.420.2 8.8 34.4 29.7 2.69.3 15.6 13.4 - 2.9-1.0 0.9 6.4 17.8 1.618.3 -3.7 - - -2.911.8 12.9 37.6 25.8 2.323.5 34.4 59.6 158.1 9.94.9 10.0 9.6 30.5 2.720.1 - - - -2.65.0 - - - 15.914.7 16.4 7.6 -22.6 -2.59.9 -14.5 -13.6 - 0.09.7 3.3 31.1 52.8 4.317.9 2.6 - - -0.2YTD 3Yr 5Yr 10Yr AGR* Yield11.5 - - - 4.2 2.59.5 15.0 13.7 - 3.1 5.318.4 -3.6 - - -2.8 3.311.0 6.7 - - 0.8 3.09.6 3.1 30.4 93.0 6.8 4.05.1 - - - 16.0 4.510.0 -13.7 -12.8 - 0.2 4.7The yields for the Distribution Funds are calculated by dividing the distributions made by the funds in the past year by the funds selling prices as at 31 December 2010. The distribution funds launched on 08February 2010 do not have a full year investment history so have not been included in this review.St. Jamess Place Pension FundsDec 09 Dec 08 Dec 07 Dec 06 Dec 05Dec 10 Dec 09 Dec 08 Dec 07 Dec 06MANAGED FUNDS Launchdate %changeAXA Framlington 07/06 15.2 19.8 -18.3 7.9 -GAM 04/00 12.0 13.7 -19.1 -1.5 10.9Invesco Perpetual101/92 10.3 12.4 -11.2 6.5 14.2Jupiter Cautious 01/07 10.5 22.9 -18.7 - -Global Managed1507/06 13.8 15.0 -25.6 15.3 -Schroder 09/96 10.6 21.5 -15.5 3.7 12.1THSP 01/92 8.3 16.1 -18.8 10.6 10.6Worldwide Polaris 01/07 21.7 27.3 -26.7 - -SPECIALIST FUNDSAlternative Assets BlackRock 08/08 8.0 15.9 - - -Continental European7SW Mitchell 01/92 20.3 14.5 -20.3 5.4 17.9Deposit1001/92 -0.7 -0.2 4.1 4.4 3.5Ethical4Aberdeen 11/98 12.6 27.7 -21.6 9.3 11.1Far East 1Aberdeen 01/92 27.6 38.9 -19.9 14.3 5.9Gilts5Wellington Management 01/92 5.7 -2.7 11.3 3.1 -1.9High Octane12 Oldfeld Partners04/08 22.6 15.2 - - -North American8RCB 01/92 15.1 29.3 -23.4 -10.9 3.6UK Growth RWC Partners 10/07 18.2 34.0 -33.2 - -INCOME FUNDSCorporate Bond11InvescoPerpetual 04/03 12.4 38.0 -20.2 0.9 -1.7AXA Framlington10/07 18.3 33.7 -37.3 - -Equity Income14 RWC Partners04/07 10.1 36.5 -26.0 - -Investment Grade Corp BdInvescoPerpetual 03/09 5.4 - - - -Property Invista 04/04 10.6 6.9 -21.6 -9.8 15.9UK Equity1InvescoPerpetual 01/92 10.8 12.6 -17.0 6.9 22.8Please be aware that past performance is not indicative of future performance. The value of an investment may fall as well as rise. Returns on equities cannot be guaranteed. Equities do not include the security of capital characteristic of a deposit with a bank or building society.For information relating to the numbers by each fund please refer to thenotes section on page 4.Cumulative performanceYTD 3Yr 5Yr 10Yr AGR*%change15.2 12.8 - - 5.612.0 3.0 12.5 96.9 7.010.3 10.2 34.0 54.6 4.510.5 10.4 - - 3.813.8 -2.7 - - 3.910.6 13.6 32.1 52.6 4.38.3 2.2 25.0 69.0 5.421.7 13.5 - - 1.88.0 - - - 6.120.3 9.8 36.4 32.3 2.8-0.7 3.1 11.4 29.2 2.612.6 12.7 36.8 32.4 2.827.6 41.9 71.7 186.7 11.15.7 14.4 15.8 42.9 3.622.6 - - - -0.815.1 14.0 5.1 -18.0 -2.018.2 5.9 - - 1.3YTD 3Yr 5Yr 10Yr AGR* Yield12.4 23.8 22.8 - 4.4 7.518.3 -0.9 - - -1.9 3.310.1 11.2 - - 2.1 3.05.4 - - - 19.3 6.510.6 -7.2 -3.0 - 2.3 4.410.8 3.6 36.1 64.7 5.1 3.8The Pension Income funds do not make distributions, and payments are made through the cancellation of units from your plan. The yields for these funds are calculated by dividing the gross incomegenerated by the funds assets in the last year by the current selling prices as at 31 December 2010. They provide an indication of the withdrawal that you may want to take.Investment performance statistics January 2011St. Jamess Place Dec 09 Dec 08 Dec 07 Dec 06 Dec 05International Life Funds Dec 10 Dec 09 Dec 08 Dec 07 Dec 06MANAGED FUNDS Launch date %changeAXA Framlington ()07/06 14.7 20.3 -18.9 7.1 -GAM()01/95 11.9 13.6 -17.4 -2.3 10.3GAM(US$)01/95 10.9 21.5 -33.4 -0.6 21.3Invesco Perpetual () 10/01 9.6 11.1 -13.0 5.9 14.5Jupiter Cautious ()01/07 10.3 21.6 -19.4 - -Global Managed () 1507/06 12.5 15.3 -26.3 15.3 -Schroder () 01/95 9.8 21.8 -16.1 3.8 12.3THSP () 01/95 8.8 17.4 -21.5 9.4 9.9THSP (US$) 06/96 5.0 28.6 -36.9 12.9 23.1Worldwide ()Polaris 01/07 22.9 25.3 -27.3 - -Worldwide (US$)Polaris 01/07 17.8 39.2 -47.1 - -SPECIALIST FUNDSAlternative Assets () BlackRock 08/08 7.3 14.6 - - -Alternative Assets (US$) BlackRock 08/08 2.9 27.3 - - -Continental European ()SW Mitchell 10/07 25.3 21.2 -40.0 - -Continental European ()SW Mitchell 10/07 21.5 12.3 -21.6 - -Corporate Bond () 11InvescoPerpetual 04/03 10.9 38.1 -21.1 0.8 -1.7AXA Framlington 10/07 17.7 31.8 -36.6 - -Euro Deposit ()9Insight 01/93 -1.1 -0.4 2.8 2.5 1.2Euro Special Deposit ()9Insight 12/92 -0.1 0.6 3.8 3.5 2.2Far East ()1Aberdeen 01/95 28.1 36.9 -22.9 14.2 5.9Greater European ()13SW Mitchell Burgundy 01/95 20.2 32.3 -45.2 2.3 22.3High Octane ()12 Oldfeld Partners04/08 23.9 12.6 - - -Investment Grade Corp Bd ()InvescoPerpetual 03/09 4.7 - - - -North American (US$) 8RCB 01/95 9.0 38.2 -46.9 -10.4 16.4US Dollar Deposit (US$)9Insight 01/93 -1.3 -1.0 1.2 3.8 3.3UK Gilts ()5Wellington Management 01/95 5.5 -2.7 10.9 3.3 -1.5UK Growth ()RWC Partners 10/07 16.3 32.9 -33.1 - -UK Sterling Deposit ()1001/93 -1.0 -0.6 3.8 4.1 3.1UK Sterling Special Deposit ()1012/92 0.0 0.4 4.9 5.2 4.1Cumulative performanceYTD 3Yr 5Yr 10Yr AGR*%change14.7 11.8 - - 5.611.9 4.9 13.0 80.7 6.110.9 -10.3 8.2 75.6 5.89.6 6.0 28.6 - 5.610.3 8.1 - - 3.312.5 -4.4 - - 3.49.8 12.1 30.7 28.4 2.58.8 0.3 20.6 62.4 5.05.0 -14.8 18.4 65.0 5.122.9 12.0 - - 1.217.8 -13.2 - - -4.2Please be aware that past performance is not indicative of future performance. The value of an investment may fall as well as rise. Returns on equities cannot be guaranteed. Equities do not include Funds launched less than 12-months ago are not permitted to showpast performance under Financial Services Authority guidelines and therefore are not included in this summary.* Annualised Growth Rates are calculated over a ten year period, or since fund launch if the fund is less than ten years old.Cumulative performanceYTD 3Yr 5Yr 10Yr AGR* Yield%change18.8 - - - 32.7 3.47.8 - - - 6.6 2.00.3 - - - 1.3 0.310.8 9.5 - - 2.8 2.222.1 10.3 - - 3.5 0.011.7 19.0 18.1 49.7 4.1 See Below9.3 10.3 30.8 91.4 6.7 3.014.0 12.4 38.4 30.5 2.7 1.329.2 39.8 72.6 188.9 11.2 0.65.8 - - - 1.3 See Below12.4 -4.6 - - 2.5 0.516.9 -5.7 24.2 45.4 3.8 0.424.3 - - - -1.2 0.08.8 1.5 24.1 57.7 4.7 0.75.9 - - - 20.9 See Below16.9 13.9 5.9 -16.8 -1.8 0.05.5 -5.8 - - -6.0 3.014.4 3.4 13.5 94.7 6.9 0.214.8 -10.0 6.9 29.0 2.6 1.318.2 7.2 - - 3.3 0.510.0 1.2 32.7 104.0 7.4 3.723.1 13.0 - - 1.5 0.0Funds DistributionYieldUnderlyingYieldCorporate Bond 7.4 6.0Inv Grade Corp Bd 6.4 5.1Gilts 2.8 1.8Global Growth Portfolio Yield = 0.4Growth & Income Portfolio Yield = 2.7Monthly Income Portfolio Yield = 4.6St. Jamess PlaceDec 09 Dec 08 Dec 07 Dec 06 Dec 05Unit TrustsDec 10 Dec 09 Dec 08 Dec 07 Dec 06FUNDSLaunch date %changeAllshare IncomeAXA Framlington02/09 18.8 - - - -Alternative Assets BlackRock 08/08 7.8 15.0 - - -CashState Street Global Advisors 04/08 0.3 0.6 - - -Cautious Jupiter 04/07 10.8 22.0 -19.0 - -Continental European SW Mitchell 10/07 22.1 14.0 -20.7 - -Corporate Bond11InvescoPerpetual 09/95 11.7 37.1 -22.3 0.8 -1.5Equity Income14 RWC Partners 02/97 9.3 34.8 -25.2 1.9 16.3Ethical4Aberdeen 04/99 14.0 25.9 -21.7 9.8 12.1Far East 1Aberdeen 01/92 29.2 37.4 -21.2 15.3 7.0GiltsWellingtonManagement 03/09 5.8 - - - -Global15Artisan 01/07 12.4 14.5 -25.9 - -Greater European Progres-SW Mitchell Burgundy 12/69 16.9 24.1 -35.0 9.2 20.6High Octane12 Oldfeld Partners04/08 24.3 13.3 - - -International THS Partners 11/71 8.8 15.3 -19.1 9.0 12.2Investment Grade Corp BdInvescoPerpetual 04/09 5.9 - - - -North American8RCB 04/99 16.9 26.6 -23.1 -10.2 3.6Property Invista 01/07 5.5 16.0 -23.0 - -Recovery3GAM 02/97 14.4 16.0 -22.1 -2.1 12.2UK & General Progressive13J O HambroLiberty Square 10/89 14.8 29.7 -39.5 0.7 17.9UK Growth RWC Partners 01/07 18.2 34.3 -32.5 - -UK High Income2InvescoPerpetual 01/92 10.0 9.8 -16.3 6.4 23.3Worldwide Opportunities Polaris 01/07 23.1 25.8 -27.0 - -not guaranteed. Yields do not include any preliminary charge and investors may be subject to tax on distributions. The distribution yields shown foramounts that might be expected to be distributed over the next twelve months; they are based on a snapshot of the portfolios as at 31 December2010. For the Cash Unit Trust the underlying yield is equal to the distribution yield. For the Corporate Bond Unit Trust, Investment Grade CorporateBond Unit Trust and Gilts Unit Trust both the distribution yield and the underlying yield are shown. The distribution yield is higher due to the impactCorporate Bond Unit Trust, 1.1% for the Investment Grade Corporate Bond Unit Trust, 1.6% for the Equity Income Unit Trust, 1.8% for the UK HighIncome Unit Trust, 2.0%for the Cautious Unit Trust, 1.7%for the Property Unit Trust, 1.7%for the Allshare Income Unit Trust, and0.8%for the Gilts UnitTrust, and constraining each funds capital performance to an equivalent extent.7.3 - - - 6.22.9 - - - -1.725.3 -8.8 - - -4.121.5 7.0 - - 3.710.9 20.8 19.8 - 3.817.7 -1.7 - - -0.1-1.1 1.2 4.9 11.3 1.1-0.1 4.3 10.3 23.1 2.128.1 35.2 63.6 162.1 10.120.2 -12.8 9.0 12.8 1.223.9 - - - -1.34.7 - - - 19.59.0 -20.1 -16.6 -27.8 -3.2-1.3 -1.2 6.0 9.1 0.95.5 13.8 15.9 37.7 3.216.3 3.4 - - 1.9-1.0 2.2 9.7 25.9 2.30.0 5.3 15.3 39.3 3.4TheInvestor | 29St. Jamess Place Life FundsDec 09 Dec 08 Dec 07 Dec 06 Dec 05Dec 10 Dec 09 Dec 08 Dec 07 Dec 06MANAGED FUNDS Launch date %changeAXA Framlington 07/06 13.1 19.5 -18.2 5.9 -GAM 04/00 11.5 14.6 -20.3 -1.4 9.7Invesco Perpetual101/92 9.0 10.6 -9.6 5.7 12.1Jupiter Cautious 01/07 11.5 20.0 -19.4 - -Global Managed1507/06 12.1 14.6 -24.3 12.8 -Schroder 09/96 9.2 21.0 -15.7 3.1 10.7THSP 01/92 6.9 16.0 -16.9 9.8 9.3Worldwide Polaris 01/07 21.4 23.7 -26.9 - -SPECIALIST FUNDSAlternative Assets BlackRock 08/08 6.5 13.8 - - -Continental European7SW Mitchell 01/92 20.2 14.5 -20.9 6.8 15.7Corporate Bond11InvescoPerpetual 04/03 9.3 32.3 -20.1 -0.1 -1.8Deposit1001/92 -1.0 -0.8 2.8 3.0 2.4AXA Framlington10/07 18.3 29.9 -37.4 - -Ethical4Aberdeen 11/98 11.8 27.5 -20.8 8.4 12.4Far East 1Aberdeen 01/92 23.5 31.3 -17.2 14.0 4.2Gilts5Wellington Management 01/92 4.9 -3.3 8.4 2.2 -2.5High Octane12 Oldfeld Partners04/08 20.1 12.0 - - -Investment Grade Corp BdInvescoPerpetual 03/09 5.0 - - - -North American8RCB 01/92 14.7 29.8 -21.8 -10.2 2.9Property Invista 04/04 9.9 2.7 -24.2 -11.0 13.5UK Equity1InvescoPerpetual 01/92 9.7 11.5 -15.5 6.2 19.5UK GrowthRWC Partners10/07 17.9 29.8 -33.0 - -DISTRIBUTIONFUNDSCautious Distribution Jupiter 04/08 11.5 19.9 - - -Corporate Bond Distribution11InvescoPerpetual 04/04 9.5 32.3 -20.6 0.6 -1.6DiversiedIncomeDistribution AXA Framlington 10/07 18.4 29.8 -37.3 - -Equity Income Distribution14 RWC Partners04/07 11.0 31.3 -26.7 - -Income Distribution2InvescoPerpetual 02/93 9.6 9.5 -14.0 5.6 19.8Investment Grade Corp Bd DistInvescoPerpetual 03/09 5.1 - - - -Property Distribution Invista 04/04 10.0 3.1 -23.9 -11.0 13.4Cumulative performanceYTD 3Yr 5Yr 10Yr AGR*%change13.1 10.5 - - 4.911.5 1.9 10.2 71.7 5.69.0 9.0 29.0 43.1 3.611.5 7.8 - - 3.212.1 -2.8 - - 3.29.2 11.4 27.0 40.7 3.56.9 3.0 23.5 54.8 4.521.4 9.7 - - 0.76.5 - - - 5.420.2 8.8 34.4 29.7 2.69.3 15.6 13.4 - 2.9-1.0 0.9 6.4 17.8 1.618.3 -3.7 - - -2.911.8 12.9 37.6 25.8 2.323.5 34.4 59.6 158.1 9.94.9 10.0 9.6 30.5 2.720.1 - - - -2.65.0 - - - 15.914.7 16.4 7.6 -22.6 -2.59.9 -14.5 -13.6 - 0.09.7 3.3 31.1 52.8 4.317.9 2.6 - - -0.2YTD 3Yr 5Yr 10Yr AGR* Yield11.5 - - - 4.2 2.59.5 15.0 13.7 - 3.1 5.318.4 -3.6 - - -2.8 3.311.0 6.7 - - 0.8 3.09.6 3.1 30.4 93.0 6.8 4.05.1 - - - 16.0 4.510.0 -13.7 -12.8 - 0.2 4.7The yields for the Distribution Funds are calculated by dividing the distributions made by the funds in the past year by the funds selling prices as at 31 December 2010. The distribution funds launched on 08February 2010 do not have a full year investment history so have not been included in this review.St. Jamess Place Pension FundsDec 09 Dec 08 Dec 07 Dec 06 Dec 05Dec 10 Dec 09 Dec 08 Dec 07 Dec 06MANAGED FUNDS Launchdate %changeAXA Framlington 07/06 15.2 19.8 -18.3 7.9 -GAM 04/00 12.0 13.7 -19.1 -1.5 10.9Invesco Perpetual101/92 10.3 12.4 -11.2 6.5 14.2Jupiter Cautious 01/07 10.5 22.9 -18.7 - -Global Managed1507/06 13.8 15.0 -25.6 15.3 -Schroder 09/96 10.6 21.5 -15.5 3.7 12.1THSP 01/92 8.3 16.1 -18.8 10.6 10.6Worldwide Polaris 01/07 21.7 27.3 -26.7 - -SPECIALIST FUNDSAlternative Assets BlackRock 08/08 8.0 15.9 - - -Continental European7SW Mitchell 01/92 20.3 14.5 -20.3 5.4 17.9Deposit1001/92 -0.7 -0.2 4.1 4.4 3.5Ethical4Aberdeen 11/98 12.6 27.7 -21.6 9.3 11.1Far East 1Aberdeen 01/92 27.6 38.9 -19.9 14.3 5.9Gilts5Wellington Management 01/92 5.7 -2.7 11.3 3.1 -1.9High Octane12 Oldfeld Partners04/08 22.6 15.2 - - -North American8RCB 01/92 15.1 29.3 -23.4 -10.9 3.6UK Growth RWC Partners 10/07 18.2 34.0 -33.2 - -INCOME FUNDSCorporate Bond11InvescoPerpetual 04/03 12.4 38.0 -20.2 0.9 -1.7AXA Framlington10/07 18.3 33.7 -37.3 - -Equity Income14 RWC Partners04/07 10.1 36.5 -26.0 - -Investment Grade Corp BdInvescoPerpetual 03/09 5.4 - - - -Property Invista 04/04 10.6 6.9 -21.6 -9.8 15.9UK Equity1InvescoPerpetual 01/92 10.8 12.6 -17.0 6.9 22.8Please be aware that past performance is not indicative of future performance. The value of an investment may fall as well as rise. Returns on equities cannot be guaranteed. Equities do not include the security of capital characteristic of a deposit with a bank or building society.For information relating to the numbers by each fund please refer to thenotes section on page 4.Cumulative performanceYTD 3Yr 5Yr 10Yr AGR*%change15.2 12.8 - - 5.612.0 3.0 12.5 96.9 7.010.3 10.2 34.0 54.6 4.510.5 10.4 - - 3.813.8 -2.7 - - 3.910.6 13.6 32.1 52.6 4.38.3 2.2 25.0 69.0 5.421.7 13.5 - - 1.88.0 - - - 6.120.3 9.8 36.4 32.3 2.8-0.7 3.1 11.4 29.2 2.612.6 12.7 36.8 32.4 2.827.6 41.9 71.7 186.7 11.15.7 14.4 15.8 42.9 3.622.6 - - - -0.815.1 14.0 5.1 -18.0 -2.018.2 5.9 - - 1.3YTD 3Yr 5Yr 10Yr AGR* Yield12.4 23.8 22.8 - 4.4 7.518.3 -0.9 - - -1.9 3.310.1 11.2 - - 2.1 3.05.4 - - - 19.3 6.510.6 -7.2 -3.0 - 2.3 4.410.8 3.6 36.1 64.7 5.1 3.8The Pension Income funds do not make distributions, and payments are made through the cancellation of units from your plan. The yields for these funds are calculated by dividing the gross incomegenerated by the funds assets in the last year by the current selling prices as at 31 December 2010. They provide an indication of the withdrawal that you may want to take.St. Jamess Place Dec 09 Dec 08 Dec 07 Dec 06 Dec 05International Life Funds Dec 10 Dec 09 Dec 08 Dec 07 Dec 06MANAGED FUNDS Launch date %changeAXA Framlington ()07/06 14.7 20.3 -18.9 7.1 -GAM()01/95 11.9 13.6 -17.4 -2.3 10.3GAM(US$)01/95 10.9 21.5 -33.4 -0.6 21.3Invesco Perpetual () 10/01 9.6 11.1 -13.0 5.9 14.5Jupiter Cautious ()01/07 10.3 21.6 -19.4 - -Global Managed () 1507/06 12.5 15.3 -26.3 15.3 -Schroder () 01/95 9.8 21.8 -16.1 3.8 12.3THSP () 01/95 8.8 17.4 -21.5 9.4 9.9THSP (US$) 06/96 5.0 28.6 -36.9 12.9 23.1Worldwide ()Polaris 01/07 22.9 25.3 -27.3 - -Worldwide (US$)Polaris 01/07 17.8 39.2 -47.1 - -SPECIALIST FUNDSAlternative Assets () BlackRock 08/08 7.3 14.6 - - -Alternative Assets (US$) BlackRock 08/08 2.9 27.3 - - -Continental European ()SW Mitchell 10/07 25.3 21.2 -40.0 - -Continental European ()SW Mitchell 10/07 21.5 12.3 -21.6 - -Corporate Bond () 11InvescoPerpetual 04/03 10.9 38.1 -21.1 0.8 -1.7AXA Framlington 10/07 17.7 31.8 -36.6 - -Euro Deposit ()9Insight 01/93 -1.1 -0.4 2.8 2.5 1.2Euro Special Deposit ()9Insight 12/92 -0.1 0.6 3.8 3.5 2.2Far East ()1Aberdeen 01/95 28.1 36.9 -22.9 14.2 5.9Greater European ()13SW Mitchell Burgundy 01/95 20.2 32.3 -45.2 2.3 22.3High Octane ()12 Oldfeld Partners04/08 23.9 12.6 - - -Investment Grade Corp Bd ()InvescoPerpetual 03/09 4.7 - - - -North American (US$) 8RCB 01/95 9.0 38.2 -46.9 -10.4 16.4US Dollar Deposit (US$)9Insight 01/93 -1.3 -1.0 1.2 3.8 3.3UK Gilts ()5Wellington Management 01/95 5.5 -2.7 10.9 3.3 -1.5UK Growth ()RWC Partners 10/07 16.3 32.9 -33.1 - -UK Sterling Deposit ()1001/93 -1.0 -0.6 3.8 4.1 3.1UK Sterling Special Deposit ()1012/92 0.0 0.4 4.9 5.2 4.1Cumulative performanceYTD 3Yr 5Yr 10Yr AGR*%change14.7 11.8 - - 5.611.9 4.9 13.0 80.7 6.110.9 -10.3 8.2 75.6 5.89.6 6.0 28.6 - 5.610.3 8.1 - - 3.312.5 -4.4 - - 3.49.8 12.1 30.7 28.4 2.58.8 0.3 20.6 62.4 5.05.0 -14.8 18.4 65.0 5.122.9 12.0 - - 1.217.8 -13.2 - - -4.2Please be aware that past performance is not indicative of future performance. The value of an investment may fall as well as rise. Returns on equities cannot be guaranteed. Equities do not include Funds launched less than 12-months ago are not permitted to showpast performance under Financial Services Authority guidelines and therefore are not included in this summary.* Annualised Growth Rates are calculated over a ten year period, or since fund launch if the fund is less than ten years old.Cumulative performanceYTD 3Yr 5Yr 10Yr AGR* Yield%change18.8 - - - 32.7 3.47.8 - - - 6.6 2.00.3 - - - 1.3 0.310.8 9.5 - - 2.8 2.222.1 10.3 - - 3.5 0.011.7 19.0 18.1 49.7 4.1 See Below9.3 10.3 30.8 91.4 6.7 3.014.0 12.4 38.4 30.5 2.7 1.329.2 39.8 72.6 188.9 11.2 0.65.8 - - - 1.3 See Below12.4 -4.6 - - 2.5 0.516.9 -5.7 24.2 45.4 3.8 0.424.3 - - - -1.2 0.08.8 1.5 24.1 57.7 4.7 0.75.9 - - - 20.9 See Below16.9 13.9 5.9 -16.8 -1.8 0.05.5 -5.8 - - -6.0 3.014.4 3.4 13.5 94.7 6.9 0.214.8 -10.0 6.9 29.0 2.6 1.318.2 7.2 - - 3.3 0.510.0 1.2 32.7 104.0 7.4 3.723.1 13.0 - - 1.5 0.0Funds DistributionYieldUnderlyingYieldCorporate Bond 7.4 6.0Inv Grade Corp Bd 6.4 5.1Gilts 2.8 1.8Global Growth Portfolio Yield = 0.4Growth & Income Portfolio Yield = 2.7Monthly Income Portfolio Yield = 4.6St. Jamess PlaceDec 09 Dec 08 Dec 07 Dec 06 Dec 05Unit TrustsDec 10 Dec 09 Dec 08 Dec 07 Dec 06FUNDSLaunch date %changeAllshare IncomeAXA Framlington02/09 18.8 - - - -Alternative Assets BlackRock 08/08 7.8 15.0 - - -CashState Street Global Advisors 04/08 0.3 0.6 - - -Cautious Jupiter 04/07 10.8 22.0 -19.0 - -Continental European SW Mitchell 10/07 22.1 14.0 -20.7 - -Corporate Bond11InvescoPerpetual 09/95 11.7 37.1 -22.3 0.8 -1.5Equity Income14 RWC Partners 02/97 9.3 34.8 -25.2 1.9 16.3Ethical4Aberdeen 04/99 14.0 25.9 -21.7 9.8 12.1Far East 1Aberdeen 01/92 29.2 37.4 -21.2 15.3 7.0GiltsWellingtonManagement 03/09 5.8 - - - -Global15Artisan 01/07 12.4 14.5 -25.9 - -Greater European Progres-SW Mitchell Burgundy 12/69 16.9 24.1 -35.0 9.2 20.6High Octane12 Oldfeld Partners04/08 24.3 13.3 - - -International THS Partners 11/71 8.8 15.3 -19.1 9.0 12.2Investment Grade Corp BdInvescoPerpetual 04/09 5.9 - - - -North American8RCB 04/99 16.9 26.6 -23.1 -10.2 3.6Property Invista 01/07 5.5 16.0 -23.0 - -Recovery3GAM 02/97 14.4 16.0 -22.1 -2.1 12.2UK & General Progressive13J O HambroLiberty Square 10/89 14.8 29.7 -39.5 0.7 17.9UK Growth RWC Partners 01/07 18.2 34.3 -32.5 - -UK High Income2InvescoPerpetual 01/92 10.0 9.8 -16.3 6.4 23.3Worldwide Opportunities Polaris 01/07 23.1 25.8 -27.0 - -not guaranteed. Yields do not include any preliminary charge and investors may be subject to tax on distributions. The distribution yields shown foramounts that might be expected to be distributed over the next twelve months; they are based on a snapshot of the portfolios as at 31 December2010. For the Cash Unit Trust the underlying yield is equal to the distribution yield. For the Corporate Bond Unit Trust, Investment Grade CorporateBond Unit Trust and Gilts Unit Trust both the distribution yield and the underlying yield are shown. The distribution yield is higher due to the impactCorporate Bond Unit Trust, 1.1% for the Investment Grade Corporate Bond Unit Trust, 1.6% for the Equity Income Unit Trust, 1.8% for the UK HighIncome Unit Trust, 2.0%for the Cautious Unit Trust, 1.7%for the Property Unit Trust, 1.7%for the Allshare Income Unit Trust, and0.8%for the Gilts UnitTrust, and constraining each funds capital performance to an equivalent extent.7.3 - - - 6.22.9 - - - -1.725.3 -8.8 - - -4.121.5 7.0 - - 3.710.9 20.8 19.8 - 3.817.7 -1.7 - - -0.1-1.1 1.2 4.9 11.3 1.1-0.1 4.3 10.3 23.1 2.128.1 35.2 63.6 162.1 10.120.2 -12.8 9.0 12.8 1.223.9 - - - -1.34.7 - - - 19.59.0 -20.1 -16.6 -27.8 -3.2-1.3 -1.2 6.0 9.1 0.95.5 13.8 15.9 37.7 3.216.3 3.4 - - 1.9-1.0 2.2 9.7 25.9 2.30.0 5.3 15.3 39.3 3.430|The Investor Cumulative performanceYTD 3Yr 5Yr 10Yr AGR*% change12.6 2.8 26.3 33.7 2.914.5 4.4 28.4 43.2 3.77.2 19.5 26.7 67.6 5.313.5 -10.1 0.3 86.4 6.42.9 10.1 19.1 44.2 3.719.1 18.5 27.3 16.6 1.514.5 11.0 18.4 2.4 0.28.2 -1.9 32.0 44.0 3.711.9 0.0 59.4 46.5 3.9-3.0 -10.7 20.2 20.5 1.9-13.0 -29.9 -12.3 -9.5 -1.021.9 21.8 33.0 67.6 5.38.4 5.6 69.4 46.1 3.914.8 17.0 1.3 -0.3 0.016.3 13.8 32.7 35.6 3.115.3 9.5 23.6 19.9 1.8St. Jamess Place Bank RatesiSAVER ACCOUNT2.49% AER/Gross P.A.CASH ISA2.50% AER/Gross P.A.DIRECT ACCESS SAVINGS0.05% AER/Gross P.A.For further information please contact your St. JamessPlace Partner or go to www.sjpbank.co.ukExchange RatesSTERLINGUS$ 1.57Euro 1.17SFr 1.46Yen 126.98 Index 79.80US DOLLAREuro 0.75SFr 0.93Yen 81.11EURO 0.86US$ 1.34Yen 108.81Leading IndicatorsUK Base Rate 0.50%US Base Rate 0.00% - 0.25%Euroland Base Rate 1.00%Average Savings Rate ** 1.18%Average Mortgage Rate 5.68%House Prices Index -2.40%Retail Prices Index 4.04%Average Earnings Index 3.10%Dec 09 Dec 08 Dec 07 Dec 06 Dec 05Dec 10 Dec 09 Dec 08 Dec 07 Dec 06UK INDICES % changeFTSE 100 12.6 27.3 -28.3 7.4 14.4FTSE All Share 14.5 30.1 -29.9 5.3 16.8FTSE All Stocks (UK Gilt) 7.2 -1.2 12.8 5.3 0.7IPD Commerical Property 13.5 2.2 -22.5 -5.5 18.1Average Savings Account ** 2.9 2.9 3.9 4.1 3.8US INDICESFTSE Act Wld N. America 19.1 14.8 -13.3 5.6 1.7Dow Jones Industrials 14.5 5.8 -8.4 4.6 2.0EUROPEAN INDICESFTSE AWEurope 8.2 23.5 -26.6 13.5 18.5DAX 30 11.9 13.8 -21.5 33.3 19.6CAC 40 -3.0 17.2 -21.5 13.5 18.5FTSE MIB -13.0 14.7 -29.8 5.5 18.6FAR EAST & PACIFIC INDICES21.9 19.6 -16.5 8.9 0.3Hang Seng 8.4 35.3 -27.9 36.6 17.4Nikkei 225 14.8 3.2 -1.2 -6.8 -7.1WORLD INDICESFTSE Act World Index 16.3 19.6 -18.2 9.5 6.5MSCI World Index 15.3 15.7 -17.9 7.2 5.3Notes:Please be aware that past performance is not indicative of future performance. The value of an investment may fall as well as rise. Returns on equities cannot be guaranteed. Equities do not include the security of capital characteristic of a deposit with a bank or building society.* Annualised Growth Rates are calculated over a ten year period, or since fund launch if the fund is less than ten years old.** Average 90 Day Savings Account, 25,000+, gross income reinvested.rdOctober 2009.Fund Manager Historical Changes from pages 28 and 29:1. Prior to 1.10.01 these funds were managed by Cazenove Fund Management Ltd. 2. Prior to 1.10.01 these funds were managed by Newton Investment Management Ltd. 3. Prior to 1.4.00 these funds weremanaged by M&G Investment Management. 4. Prior to 1.7.02 these funds were managed by Henderson Global Investors Ltd. 5. Prior to 6.4.03 these funds were managed by Deutsche Asset Management. 6. Priorto 6.4.03 these funds were managed by GAMLtd. 7. Prior to 17.9.07 these funds were managed by Bank of Ireland Asset Management and listed as Greater European. 8. Prior to 2.2.04 these funds were managed by INVESCO NAM.9. Prior to 10.03.2008 the Dollar Deposit, Euro Deposit and Euro Special Deposit funds were managed by Capita. 10. Since 01.02.2009 the Life Deposit, Pension Deposit, International Sterlingby THS Partners. 14. Prior to 18.10.10 this fund was managed by Schroder Investment Management. 15. Prior to 18.10.10 this fund was managed by Newton Investment Management.Market Background