Floating Rate Income Fund by lindahy


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									Floating Rate Income Fund
September 2009
Fund Aim                                                           Fund Facts
To provide returns above inflation and cash over the short to      Inception date                                                          17 Jun 2004
medium term.
                                                                   Fund Size                                                        $1,428.54 million
Time Frame
3 years                                                            Management Expense Ratio (MER) 0.1538% + performance-
Type of Fund                                                                                                  based fees
The Fund will use interest rate futures, interest rate swaps and   Income Distribution Frequency                                               Quarterly
other interest rate derivatives with the aim of minimising the
interest rate risk via the Fund’s investment in the AMP Capital
                                                                   Level of Risk                                                       Low to Medium
Corporate Bond Fund while retaining exposure to the credit
spread risks and the income returns from the AMP Capital
Corporate Bond Fund.                                               Sell Spread                                                                      0.25%

Performance Benchmark                                              Performance - periods to 30 September 2009
UBS 90 Day Bank Bill Index
                                                                                                    %                              % p.a.
Asset Allocation
                                                                                           1 mth        3 mth        1 yr       3 yr        5 yr Incept

                                                                   Growth Return                        3.98        -3.71      -2.46 -1.47
                                                                   Income Return                        1.45         5.67       6.77       6.57
                                                                   Before tax and            1.32       5.03         2.13       4.51       5.32       5.39
                                                                   Before tax aft            1.31       5.43         1.96       4.31       5.10       5.17
                                                                   Benchmark*                0.28       0.80         4.31       6.16       6.01       5.98

                                                                   *Returns greater than one year have been annualised

                                                                   "Returns are calculated using the unit price which uses the net asset values for the
                                                                   relevant month end. This price may differ from the actual unit price for an investor
                                                                   applying for or redeeming an investment. Actual unit prices will be confirmed following
                                                                   any transaction by an investor. Returns quoted are before tax, after Class 'X' fees and
                                                                   costs, assume all distributions are reinvested and are annualised for periods greater than
                                                                   one year"
Performance                                                                               seen. The prospect for increased global mergers and
                                                                                          acquisitions activity is also likely to be raised over the short-
The Fund outperformed its benchmark in the September
                                                                                          term, as strong companies with stable cashflow look to
quarter (on a before fee, before tax basis).
                                                                                          consolidate within their respective industries.
Credit markets steadily improved in the September quarter on
the back of the recovering economy, although momentum
started to slow towards quarter-end. July started off on a
negative note, driven by weaker than expected US non-farm
payrolls and an unexpected drop in consumer confidence.
However, this reversed mid-month and both equity and credit
markets forged ahead for the remainder of July further to
stronger than expected corporate earnings reports and better
than expected economic data. August was a great month for
credit markets, supported by an upbeat economic news flow
and a positive earnings season. While there was still evidence
of the net income deterioration year-on-year, most companies
posted results ahead of market expectations. There were
concerns in the latter part of the month over the
announcement by the US Federal Deposit Insurance
Corporation (FDIC) of further failures by US regional banks.
The FDIC added 111 lenders to their list of ‘problem banks’,
which suggested that rising bank failures may force it to
deplete a reserve fund that shrank 40% this year. In
September, credit spreads on physical bonds continued to
tighten significantly. However, towards the end of the month
demand for cash bonds slowed down as there was a sense
that spreads had tightened a little too far, combined with a
growing threat of increased regulation emanating from the
G20. Further, some negative macroeconomic data surprised
to the downside putting a halt to equities trending higher. Bank
ratings also came under pressure during the month due to a
European Commission directive towards those banks
receiving government aid. This resulted in Royal Bank of
Scotland (RBS) announcing its intention not to call various
subordinated debt which was coming due.
The Fund outperformed strongly over the quarter due to an
overweight credit position and a significant rally in credit
products after the late February/early March wides. There was
some considerable performance from the subordinated
financials sector (including Tier 1), global issuers and holdings
in listed hybrids (albeit modest). These rallied strongly on the
back of the chase for yield, a return in positive equity
sentiment and a reduction in systemic risk concerns. Some of
the stronger single name performers include AXA Tier 1,
Swiss Re T1, Macquarie Bank subordinated debt,
Lottomattica, Glencore and Morgan Stanley.
Over the last few months, we have seen a very positive
response in risk markets to the steps taken by policymakers
globally to put the world economy on a surer footing. While
the turmoil of the last 12 months is still at the forefront of most
investors’ minds, the size and nature of the unconventional
policy means put in place by the larger central banks has led
to significantly improved sentiment in the markets. The
challenge confronting central banks now appears to be the
delicate balancing act of maintaining these unconventional
policies until such time that business investment is at a more
‘normal’ level, versus the risk that this additional liquidity is left
in the system for too long and inflation starts to become a
problem again. How this removal of stimulus is handled will
likely have a large impact on the prospect of a ‘V-shaped’
recovery. We still feel that the credit crisis has not run its
course, but the last few months have highlighted how quickly
recapitalisation responses by financials and corporates can
improve sentiment in equities and credit markets.
Nevertheless, the real economy will continue to feel
considerable pain, especially in more cyclical industries.
Recent company earnings reports have highlighted that
improvements to profitability have been primarily through cost-
cutting; an improvement in economic stability is likely to be
required before significant gains through revenues will be

 Investors should consider the Offer Document available from AMP Capital Investors Limited (ABN 59 001 777 591) for the                        For more information
 Future Directions Balanced Fund before making any decision regarding the product. Neither AMP Capital, nor any other                              T: 1800 658 404
 company in the AMP Group, guarantees the repayment of capital or the performance of the product or any particular rate of
 return. Past performance is not a reliable indicator of future performance. AMP Capital makes no representation or warranty                       F: 1800 630 066
 as to the accuracy or completeness of any statement in this fact sheet. This fact sheet has been prepared for the purpose
 of providing general information, without taking account of any particular investor's objectives or financial situation. An
                                                                                                                                E: clientservices@ampcapital.com
 investor should, before making any investment decisions, consider the appropriateness of the information in this fact sheet,          W: www.ampcapital.com.au
 and seek professional advice, having regard to the investor's objectives and financial situation.
                                                                                                                                               ABN:59 001 777 591
                                                                                                                                                     AFSL: 232497

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