FIDUCIAN STRUCTURED INCOME FUND

The Fiducian Structured Income Fund consists of a blend of managed funds that invests in a diversified blend of mortgages, subordinated (mezzanine) debt, other high yield securities, loans and some cash. The objective is to deliver a higher return than cash or a mortgage trust, over a three-year time horizon. The underlying investments in mortgage trusts are loans to borrowers for commercial and residential properties and are predominantly on a first charge basis. So if these borrowers were unable to pay back the loan and interest, the funds we invest in would be first in line to recover their loans from the sale of properties. The mezzanine debt securities (a significant proportion of the total) are constructed from subordinated loans given to businesses for acquisitions, property development or, for example, a management buy-out. This means that if the borrowers default, the underlying funds we have selected stand behind the senior debt holders or those who have a first charge on the assets. Therefore, subordinated debts may not be fully recovered in a default situation and for this risk mezzanine lenders demand a higher interest rate from borrowers. Other funds having different ‘high-yield’ securities and loans may be added from time to time to increase diversification and reduce risk. Interest paid to the underlying funds we have selected is channelled back to you after costs on a quarterly basis.

Fiducian has tried to reduce the risk to investors by blending different funds with different securities in the Structured Income Fund. The current underlying funds are the Challenger Howard Wholesale Mortgage Fund and The AMP Structured High Yield Fund. However, while variations in unit price (volatility) may be relatively low to give the semblance of a mortgage or enhanced cash trust, there is a relatively higher level of underlying credit risk. In periods of economic distress, borrowers may fail to repay interest and/or capital to our underlying funds. Such events could result in capital losses to investors in the Fiducian Structured Income Fund or even delay the payment of withdrawals. Investors who decide to hold for long-term periods need to be aware that the Fund is unlikely to have capital growth to keep up with inflation, but it should not be treated as a cash fund. It is recommended that your financial adviser be consulted.

Fund Commencement
April 2006

Benchmark and Objective
The relevant market benchmark is the UBS Bank Bill Index. The objective is to exceed the benchmark (after fees) by 2.5% over rolling 3-year periods.

Asset Allocation