UK Equity Income Fund

Invests predominantly in UK companies which demonstrate an ability to

maintain and grow dividends and currently offer significant potential for both

long-term capital appreciation and sustainable income.

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  • Please note: From 2 July 2009 this fund will not be listed in the Financial Times

as at 31 August 2010

Key points

  • The investment objective of the fund is to seek to generate an absolute return in all market conditions through exposure primarily to UK securities
  • Investment management responsibility for the fund is with Loudwater Investment Partners Limited since 1 December 2009
  • Sector: IMA UK Equity Income

Current views

For the month of August the FTSE 100 was down -0.62% compared to a -0.58% drop in the fund’s unit price (for both accumulation and income units.) For the quarter May–August, the FTSE was up 0.71% whilst the income and accumulation units of the fund were up 0.85% and 1.88% respectively.

In a month when the FTSE veered — due to low volumes and continued economic certainty — from a high of 5410.5 to a low of 5109.4 (before ending the month at 5225.2) we were satisfied, if not content, with the monthly fund performance.

There remains very little to add to our take on the macroeconomic environment — and our subsequent strategy — that we have not explored in previous updates. To summarise, we think that until there is a clearer economic outlook, the FTSE 100 looks set to continue to oscillate in the 4800-5800 region depending on how daily news items are received. Allied to our value, rather than market, driven investing philosophy, in this environment there seems to be two main ways to profit. Firstly, by foreseeing each peak and trough within the oscillation and buy and sell accordingly. Secondly, by picking stocks which pay good dividends so that during the midst of capricious capital values, investors can bank returns.

Whilst always looking for opportunities to trade over or under-valued stocks, our focus remains on the second of these options; dividend stocks. August saw an encouraging round of corporate earnings with rising dividends above inflation, so we remain convinced that our strategy remains sensible.

At a micro level, we made only one change to the make-up of the fund. We sold our holding in Aviva following excellent results that saw the share touch £4 having been hovering at the £3 mark in July. We reinvested the proceeds in existing stocks within the portfolio including Vodafone and Tesco.

Allocation by industry sector (exp as % of fund)

Gas, water and multiutilities 11.92
Oil & gas producers 9.19
Food & drug retailers 9.00
Pharma and biotechnology 7.98
General financial 7.82
Banks 7.43
Mining 6.78
Mobile telecommunications 5.86
Food producers 5.42
Life insurance 4.14
Other 20.72
Cash 3.74

Top ten holdings (exp as % of fund)

Royal Dutch Shell 6.75
Vodaphone 5.86
HSBC 5.71
GlaxoSmithKline 4.38
National Grid 4.25
British American Tobacco 3.65
AstraZeneca 3.60
Tesco 3.54
BHP Billiton 3.45
Unilever 3.41

Financial information

Nav Class A Acc 109.03p
Nav Class A Inc 107.34p
Total net assets £12.0m

Five-year performance

Year- Calendar year
to-date 2009 2008 2007 2006 2005
Fund n/a n/a n/a n/a n/a n/a
UK Equity Income sector n/a n/a n/a n/a n/a n/a
Note: Performance will be indicated one-year after change of manager.

Fund facts

ISIN Class A Acc GB00B1GW7B6
ISIN Class A Inc GB00B5833P17
Distribution Quarterly
28 February, 31 May, 31 August, 30 November
Dealing/valuation frequency Daily
Accounting year-end 30 September
Settlement T+4
EU Savings Directive In scope
Currency GBP
Annual charge Class A 1.50%
Minimum initial Class A £1,000
Initial charge 5.00%
ISA wrapper Yes
ISA transfer Yes
Savings plan Yes
Sector IMA UK Equity Income
Depositary
BNY Mellon Trust & Depositary (UK) Limited
Registrar
Capita Financial Administrators

Fund performance vs IMA UK Equity Income sector excludes the effect of initial charge and assumes any income reinvested net of UK tax. The Fund moved from the IMA UK All Companies sector to the IMA UK Equity Income sector on 1 January 2010.