11th May 2009

Thames River Capital Update

A tricky 6 months
The last 6 months has again proved a very challenging time for all investors in financial markets. Significant market volatility has tested management skills, but we are pleased to report that all of our five funds were strong relative performers in their respective competitor peer groups, building on the outperformance we delivered in the prior six month period. The performance of our funds in absolute terms ranged between +0.9% and -3.8%, with outperformance of sector averages ranging between 4.7% and 9.2% over the six month reporting period*. To help put returns achieved into some sort of perspective, the FTSE 100 Index of leading UK shares was down in excess of 10% over the reporting period including any income received.

(source: Lipper Hindsight 6th October to 3rd April 2009).

* Past performance is not necessarily a guide to future performance and the value of an investment can go down as well as up. Investors may not get back the full amount originally invested.

Performance helped by correct reading of market rallies
With very volatile investment markets during the reporting period, achieving better than average returns had much to do with recognising the depth and likely duration of the downturn in the global economy. Trying to maintain a defensive overall stance via careful portfolio construction, but equally recognising that within any such bear market there are periods when the market can rise as well as fall also helped. Having the ability to position portfolios to account for this was crucial. Thankfully we moved to a more fully invested position before equity markets experienced the year-end rally, before taking profits ahead of the New Year falls, once again adding to equity markets in early March through to the end of the reporting period when we experienced another such increase in share prices. As well as buying into underlying funds in the portfolio to gain access to the market, we have on occasions used the FTSE 100 Future, a relatively cheap and quick way to get cash into and out of the market without disrupting the underlying manager portfolios, and this has proved helpful to performance in times of such market volatility.

Sticking with the tried and tested
Another crucial factor behind our strong relative performance was the avoidance of investment in a number of areas, or the early sale of assets in particularly badly hit areas of the market to help protect capital values. Very little exposure to commercial real estate, smaller companies or higher yielding fixed income assets would be three such examples where this strategy helped. Another such example was the increased use of cash as a very sensible asset class in times of market difficulty despite falling rates of return on deposit account. The continued focus on high quality experienced investment managers in the invested portfolios and the avoidance of investment fads and fashions was also helpful to relative performance. Sticking with tried and tested investment talent is how we have always managed money and this is how it will stay, because over the long term we believe it works.

A little more optimistic but volatility to remain
We continue to concentrate on generating out-performance in comparison to our competitors, thereby helping to minimize the impact of tougher market conditions and we will continue to do this by employing a diversified investment strategy. With financial markets already significantly lower than where they were only 6 months ago and with governments around the world now fully engaged with the need to stimulate economies, we are a little more optimistic about the potential for positive returns, although fully accept that volatility will remain a feature of financial markets for some while to come.