Bulls & Bears UK Equities Positives Positive earnings and dividend growth as companies continue to control costs Strong cash flow and share buy backs provide positive valuation support Negatives Oil and resource companies vulnerable to falls in commodity prices Concerns remain about the housing market and prospects for bad debts US Equities Positives Markets anticipating further interest rate cuts in response to credit market problems Valuations have improved, especially for financials and some cyclicals Negatives Squeeze on corporate margins could force investment spending cuts Considerable uncertainty about extent of negative news from the housing sector European Equities Positives Management still focused on restructuring efforts and M&A opportunities Companies benefiting from emerging economy orders for capital spending Negatives Exports coming under pressure as US and other major trading partners slow Rise in commodity prices and the Euro’s appreciation are squeezing corporate margins Japanese Equities Positives Companies are still benefiting from strong regional demand Increasing dividends plus share buy-backs are helpful for investors Negatives Companies increasingly face weakening exports to the US Domestic economic data remains lacklustre Emerging Markets Positives Commodities cycle remains positive Some central banks able to ease monetary policy as inflation remains under control Negatives Valuations remain high in many markets Higher food prices are squeezing consumers and worrying central banks Asia Pacific Equities Positives Chinese economy to remain robust on the back of fixed investment Strong retail inflows into stock markets in many countries Negatives Valuations have deteriorated versus developed stock markets Equities at risk from any marked slowdown in OECD or Chinese demand Property Positives · Strong occupier demand and limited supply in US and Asian office markets New vehicles appearing for diversification into global property · Sustained employment and economic growth continues to support UK occupier and rental markets Negatives · Keen valuations and slower consumer spending in the UK are depressing the outlook for returns · Valuations have become stretched in some Global markets Sector is vulnerable to withdrawal of global liquidity and higher credit costs Investment Grade Bond Positives · Previous rate rises and credit market turmoil should restrain economic activity Defensive characteristics of longer dated Gilts increasingly recognised · Strong retail and institutional investor demand for extra yield amidst limited issuance Negatives · After a flight to quality, gilts are vulnerable if investor confidence revives quickly Longer end of gilt curve vulnerable if interest rates are cut significantly Downturn in earnings growth would lead to higher corporate bond defaults

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