Fund Objective

The Fund aims to provide a competitive level of income consistent with a high degree of security of capital.

View on Past Performance

The second quarter of 2008 saw one 0.25% cut in the base rate in April to 5.00% by the Monetary Policy Committee (MPC). This decision was expected by the market and was required to help the financial markets and the broader economy, even though inflationary pressures remain.Inflation currently stands at 3.6% - above the target rate and has required the Governor of the MPC to write an open letter to the chancellor explaining why and what they intend to do about it. However, house prices continue to fall and there are clear signs of the retail sector slowing dramatically.The high three month Interbank lending rate has continued throughout the quarter where the rate ended at 5.95%, 95bp above the base rate. This continues to be potentially the most worrying scenario for the MPC.Nothing seems to be helping lower this rate, which means the whole mortgage market has dried up and it is this that is leading to such a severe downturn in the housing market and the economy.

Future Expectations

The market now expects to see at least one rate rise before year end to combat the inflationary threat but the MPC must balance high inflation and a sharp downturn with the economy. Our forecast is for no change in rates this year and a fall to maybe 4% by the end of 2009.

Fund Details