The BSII Emerging Markets strategy continued its excellent performnace in the 2nd quarter of 2001 relative to the Index. The longer term performance is also excellent - demonstrating the ability of the managers to outperform in volatile investment environments. We remain positive on Asian and Australasian stockmarket prospects. Consequently, other than in the technology area, management have adopted a generally cautious approach to expansion. Balance sheets are, for instance, in much better shape than in the mid 1990s.
Valuations are still attractive on a global perspective.
Restructuring remains on the agenda and corporate governance is improving. Countries in the Region are very dependent on exports. Sustainable growth relies, therefore, on demand from the developed economies of Europe, Japan and the USA holding up at current levels. Progress in restructuring the banking sectors of many countries in the Region will also have to be maintained. While domestic demand is generally growing, confidence continues to be fragile.