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					                                                                                                         UK FIXED INTEREST FUND

    Fund objective                                                                     Fund profile
The fund will seek to achieve long-term capital growth                               Risk-rating:                           Low-medium
through a diversified portfolio of UK bonds and cash                                 Benchmark:                             Micropal UK Fixed Interest (£)
where appropriate.                                                                   Fund manager:                          Richard Woolnough (London)
                                                                                     Launch date:                           11th May 1982
                                                                                     Offer price (at 29.01.02):             £7.037
                                                                                     Bid price (at 29.01.02):               £6.546
    Historical performance

                                                                                       Fund commentary
                                                                                     Following on from its five interest rate cuts earlier in the year,
                                                                                     the Bank of England’s Monetary Policy Committee cut its
                                                                                     benchmark lending rate on two more occasions, taking it
                                                                                     from 4.75% to 4.0%, its lowest level in 40 years. Market
                                                                                     expectations point to a reversal of this trend in the second
                                                                                     quarter, although we believe that the turnaround will be later
                                                                                     than this. There was some steepening of the yield curve as
                                                                                     ten year yields rose by around 15 basis points, taking them
                                                                                     above 5% for the first time since before 11th September.

                                                                                     The economy continues to hold up well in the face of a US-
                                                                                     led global downturn. Although the manufacturing sector
                                                                                     remains depressed, the consumer sector continues to remain
                                                                                     buoyant, benefiting from the environment of low interest
    Current fund rationale                                                           rates. This should help to revive economic activity later this
                                                                                     year and into 2003 as monetary policy has been eased. The
•    While the market expects interest rates to start to                             budget is expected to be in deficit, which will continue to
     rise again as early as the second quarter of this                               benefit corporate spreads.
     year, we believe that they will not do so until later
     than this.

•    In the light of this, we expect short rates to stand at
     4.5% in a year’s time. Rates could fall by a further                              Current fund breakdown
     25bp from their current level of 4.0% before they
     start to rise again.

•    Within the gilt market we currently favoured medium
     dated issues over longs, as we expect continued
     speculation over possible UK membership of the
     single currency, therefore the UK and euro curves
     will converge.

    Fund’s current holdings
UK Gilts 8.75%             32%          UK Gilts 9%                20%

UK Gilts 6.25%             30%          UK Gilts 5%                18%
                                                                                       Relative performance over rolling periods
                                                                                                                          Fund                    Benchmark
                                                                                     One Month                          -0.65%                         0.95%
                                                                                     Six Months                          1.60%                         2.74%
                                                                                     One Year                            1.41%                         3.35%
                                                                                     Three Years                         1.88%                         6.83%
                                                                                     Five Years                        33.97%                        36.21%

Past performance is not necessarily a guide to the future. The value of securities can go down as well as up and you may not get back the amount originally invested.
This information is for professional advisors only. All performance figures source: Standard & Poors Micropal/Micropal, bid to bid, £ terms, periods to 30/01/02.    3
Unit Price information source: Internal, using pricing date shown. Because of these different dates, unit price information may vary slightly from performance data presented here.

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