Distribution
The September 2004 distribution amounted to 2.1936 cents per unit, (June 2004: 2.4766 cpu) bringing the distribution for the last four quarters to 9.2374 per unit. As expected, the September distribution is lower than the June distribution as a result of the maturing of higher yielding deposits and lower current interest rates.

Future Income
There is uncertainty as to the short term direction of interest rates. From a bigger picture, it would appear that we are at the bottom of an interest rate cycle with the 1 - 2 year expectation being higher rates than current levels. The distribution is likely to be slightly lower over the next quarter as a result of the further maturing of higher yielding deposits.

Capital
The majority of the portfolio is invested in money market and fixed deposits with no risk of capital volatility. The balance, 26%, of the portfolio is exposed to listed property, which is subject to capital fluctuations.

Distribution
The June 2004 distribution amounted to 2.4766 cents per unit, (March 2004: 2.0812 cpu) bringing the distribution for the last four quarters to 10.1982 cents per unit. The June distribution is higher than the March distribution as a result of a switch from deposits to higher yielding short dated bonds.
Future Income
It would appear that we are at the bottom of an interest rate cycle and there is an expectation that interest rates will be increased towards the end of 2004 or early 2005. The distribution is unlikely to materially change over the next quarter.
Capital
The majority of the portfolio is invested in money market and fixed deposits with no risk of capital volatility. The balance, 22%, of the portfolio is exposed to listed property, which is subject to capital fluctuations.

Distribution
The March 2004 distribution amounted to 2.0812 cents per unit, (Dec 2003: 2.5220 cpu) bringing the distribution for the last four quarters to 11.0117 cents per unit (last 4 quarters to Dec 12.076 cpu), the current distribution when annualized represents a yield of 7.5%.

Future Income
Interest rates remain unchanged with no drop in interest by the Reserve Bank during February. It is unlikely that there will be further cuts to interest rates. Instead a rise in interest rates may occur toward the end of this year. As the majority of long-term deposits in the fund have matured, the cash element of the fund is short dated. As a result distributions are unlikely to vary materially in the next quarter unless there is a change in interest rates.

Capital
At the current asset allocation, the majority of the portfolio is invested in money market and fixed deposits with no risk of capital volatility. The balance, 20%, of the portfolio is exposed to listed property, which is subject to capital fluctuations.

Distribution
The December 2003 distribution amounted to 2.5220 cpu, (Sep 2003: 3.1184 cpu) bringing the distribution for the last four quarters to 12.6921 cpu (last four quarters to Sept 13.9249 cpu), the current distribution when annualised represents a yield of 9.15%.

Future Income
Interest rates declined by 0.5% in December, bringing the total to a 5.5% drop this calendar year. Further interest rate cuts this quarter are unlikely although some commentators are mooting a cut of 0.5% in February. As fixed deposits mature within the fund and are replaced by lower yielding deposits, income from the fund will decline as well. As a result, the March 2004 distribution is likely to be lower than December 2003.

Capital
At the current asset allocation, 75% of the portfolio is invested in money market and fixed deposits with no risk of capital diminution. The rest of the portfolio is exposed to listed property. Investors should be aware that in the fund manager's opinion, listed property is currently overvalued. Any negative price correction should be minimal as the current exposure to property is only 20%. This risk is more than offset by the higher yields obtained as a result of this holding.