Fund Objective

The Fund's investment objective is to provide a high quarterly income. It invests in corporate bonds and Government securities.

View on Past Performance

Government bond markets were mixed, with short-maturity paper rallying but longer-dated bonds stable to weaker. The corporate bond market was extremely weak, with credit spreads on all types of bond widening sharply. Given the defaults in the US, financials of all kind were very weak. Elsewhere, industrials performed poorly.While not immune from wider spreads, the sale of financials during the summer offered some protection. Changes in September were modest. Shortmaturity AIG paper was sold after the US loan was announced. The fund also benefited from an underweight Lloyds TSB position and this was closed post-HBOS merger.

Future Expectations

Credit market conditions remain fragile given recent news and as events unfold. This will ultimately provide opportunities, but buyers can afford to be patient. We continue to try to restrict corporate exposure to names able to weather the economic downturn.

Fund Details