Charities Aid Foundation Bond Income Fund

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Charities Aid FoundationBond Income Fund

• Robert McHenry
• 20 May 2008

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Presenter
Robert McHenry Fixed Income Product Manager
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Insight autonomy with strong financial backing

• The autonomous asset management company of the
  HBOS Group
• HBOS A strong and committed parent
• AA- credit rating1
• Aa1 credit rating2
• 15th largest UK company by market capitalisation3
• 109 billion assets under management4
• A focus on excellence in key areas
• An approach that emphasises delivering high
  quality solutions for our clients

1 Source Standard Poors as at 30 June
2007 2 Moodys as at 20 April 2007 3 Source
Bloomberg as at 30 November 2007 4 Source
Insight Investment as at 31 March 2008
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Charities Aid FoundationBond Income Fund

• Benchmark 75 FTSE All Stocks Gilt Index 25
  Merrill Lynch Sterling Non-Gilts Index
• Fund objective To provide high and consistent
  levels of income with low capital volatility
• Investment objective To outperform the benchmark
  by 0.75 per annum over rolling three year
  periods, gross of fees
• Income Now distributed on an effective yield
  basis

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Investment Philosophy Process
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Investment philosophy

• We aim to provide consistency in the generation
  of performance

Diversification Spreading Investments
Precision Targeting Investments
Consistentperformance


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Investment philosophyDiversification

• Generating higher and more consistent returns
  over time

Market allocation
Duration and yield curve
Credit strategy
Integrated Decision Making
CAF Bond Income Fund
Security selection

• We use a wide range of different opportunities
• We avoid concentration of risk

Currency selection
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Performance
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Performance to 31 March 2008

• Performance of the Fund is based on an Offer to
  Offer basis. Insight Investment assumed
  management of the Fund on 1 February 2006.
  Periods greater than 1 year are annualised.
• Source Russell/Mellon CAPS and RIMES

1 year Attribution to 31 March 2008
Source Insight InvestmentNote Estimated
attribution
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Market review
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UK government bonds
Q2 2007 Yields rose
Subsequentlyyields fell

• Yield decline was good for fund performance

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UK Yield Curve

• Being Underweight very long dated bonds was good
  for performance

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Credit Markets

• Credit markets spreads widened dramatically
  during last 12 months
• Financials suffered more than most sectors
• Our allocations here were a negative for
  performance

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Security Selection

• Northern Rock Saphir Fin Perp 2016 (Tier1) vs
  Northern Rock 2015 (Lower Tier 2)

Source Bloomberg

• Having some Northern Rock was a negative for
  performance

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Investment outlookOur views UK Economy
UK inflation - CPI measure (yoy)
Economic forecasts for 2008/2009
Source Bloomberg

• Period of more modest economic activity
• Situation remains fragile

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Investment outlookOur views Market Forecast
12-month market forecast bonds
For the UK, we forecast the repo rate rather
than 3-month interest rates Source Insight

• We expect longer dated yields to remain close to
  current levels
• UK curve to remain inverted at the long end

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Investment outlookOur views UK Government Bonds
UK government yield curve vs Insight forecasts ()
Source Bloomberg

• We do not see good value in gilts at short
  maturities

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Investment outlookOur views UK Corporate Bonds
Global credit default rates ()
AAA UK RMBS spread over LIBOR (bps)
Source Market iBoxx, UBS Delta
Source Deutsche Bank

• Good value appearing in investment grade market
• Improvement in the liquidity landscape

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Notes

• Please note
• All features in this pack are current at the time
  of publication but may be subject to change in
  the future.
• Unless otherwise stated, the source of
  information is Insight Investment. Any forecasts
  or opinions are Insight Investments own at the
  date of this document and may change. They should
  not be regarded as a guarantee of future
  performance.
• This document is intended for investment
  professionals only and should not be relied upon
  by private investors. No modifications or
  amendments to this presentation may be made
  without the prior permission of Insight
  Investment. The document is to be used by the
  intended recipient(s) only and the document may
  not be forwarded to a third party without prior
  consent from Insight Investment.
• Depending on the investors currency of
  reference, currency fluctuations may adversely
  affect the value of investments and the income
  therefrom.
• Past performance is not a guide to future
  performance.
• Unit prices may go down as well as up,
  particularly in the short term. The value of an
  investment may fluctuate and cannot be
  guaranteed. Where applicable, unless otherwise
  indicated, the performance of the pooled funds
  illustrated is calculated on an offer to offer
  basis with income reinvested and net of
  management charges.
• Trading in derivative instruments may involve a
  higher degree of risk and there can be no
  assurance that the objectives of the portfolio
  will be attained.
• Telephone calls may be recorded.
• Disclaimer
• This document is for information purposes only.
  No party shall have any right of action against
  Insight in relation to the accuracy or
  completeness of the information contained in it,
  or any other written or oral information made
  available in connection with it. Any investment
  advice that we provide to you is based solely on
  the limited initial information which you have
  provided to us. Notwithstanding that Insight may
  have reviewed the Statement of Investment
  Principles of any relevant trust, no part of any
  document or presentation provided by us prior to
  our formal appointment as discretionary
  investment manager by way of written agreement
  shall be deemed to constitute "proper advice" for
  the purposes of the Pensions Act 1995 (as
  amended). Any limited initial advice given will
  be further discussed and negotiated in order to
  agree formal investment guidelines which will
  form part of a written investment management
  agreement between the parties.
• Issued by Insight Investment
• Insight Investment Management (Global) Limited,
  Clerical Medical Investment Group Limited and
  Clerical Medical Managed Funds Limited are
  authorised and regulated by the Financial
  Services Authority and are part of the HBOS
  Group. All companies registered in England and
  Wales. Registered office 33 Old Broad Street,
  London EC2N 1HZ.
• Notes for clients and prospects of Insight
  Investment Funds Management Limited Issued by
  Insight Investment Management (Global) Limited,
  on behalf of . Insight Investment Funds
  Management Limited, Reg. No. 1835691. Insight
  Investment Management (Global) Limited, Reg. No.
  00827982.
• Notes for clients and prospects of Clerical
  Medical Investment Group Limited Issued by
  Insight Investment Management (Global) Limited on
  behalf of Clerical Medical Investment Group
  Limited. Clerical Medical Investment Group
  Limited, Reg. No. 03196171. Insight Investment
  Management (Global) Limited, Reg. No. 00827982.
• Notes for clients and prospects of Clerical
  Medical Managed Funds Limited Issued by Insight
  Investment Management (Global) Limited on behalf
  of Clerical Medical Managed Funds Limited.
  Insight Investment Management (Global) Limited.
  Reg. No. 00827982. Clerical Medical Managed Funds
  Limited, Reg. No. 01580284.

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