Fund Objective

The Fund aims to achieve a total return primarily by way of income with some capital growth.

View on Past Performance

Conditions in emerging market debt remained difficult. Concerns about the sub-prime mortgage sector in the US affected credit markets. Although emerging market names performed well compared with US and European corporate risk, spreads widened.The fund retained a relatively high cash exposure of 15%, as well as credit exposure to short-dated and wellfinanced names. Returns were thus protected. The fund's non-US dollar exposure also helped as the dollar weakened against most currencies. The Argentine peso proved an exception. The fund's exposure to the currency is 2%, which we believe remains appropriate given its high yield and current account surplus.

Future Expectations

We do not believe that the losses in sub-prime mortgage lending in the US will continue to exert a negative influence on emerging debt markets, given continued global growth and low inflation, as well as the liquidity provision that central banks around the world are in a position to provide should contagioninto broader credit markets develop further. However, we are clearly in a period of heightened investor sensitivity and the spread widening recently experienced in credit markets is unlikely to reverse quickly.

Fund Details