Benefits of investing in AYF

In summary, the benefits of an investment in AYF include providing investors with the following:

• A diversified exposure to fixed and floating rate investments issued by a diverse range of Australian corporate borrowers.

• A diversified income alternative.

• Enhanced liquidity provisioning - On market through the Australian Securities Exchange (ASX) and Bi-Monthly Off Market application and Monthly redemption facilities.

• Quarterly distributions in accordance with the Fund's distribution policy.

• Distribution of franking benefits to UnitHolders.

• Risk management procedures that are designed to reduce the risks typically associated with holding Securities individually.

• A distribution reinvestment plan.

Investor suitability

The Fund is suitable for investors who are seeking to earn a rate of return consistently above the bank bill and Bank Term Deposit rates of return but are prepared to accept a small degree of capital risk to achieve that objective.

About the Fund

Listed on the Australian Securities Exchange (ASX) in October 2006 the Australian Enhanced Income Fund is a listed managed hybrid fund. The Fund invests in a diversified portfolio of up to 35 ASX listed debt equity hybrid securities. 

The Fund's total return outcome is determined by:

• the level of cash and franked income received from the Fund's investments and 

• changes in the capital value of the Fund's investments. 

The volatility of the Fund's total return is low due to the greater proportion of the return outcome being attributed to stable cash and franked income with changes in the capital value of securities playing a minor role. 

As a consequence an investment in the Fund is ideally suited to investors seeking capital stable franked income returns. 

Investment philosophy

Our investment philosophy is based on the observation that the Australian listed debt equity hybrid market is inefficient. It is inefficient for the following reasons:

1. The investor base is comprised largely of retail investors; and
2. Security structures are complex and require a comprehensive understanding of the PDS pursuant to which the security is issued.

How we invest your money

The Fund invests in a range of ASX income and Hybrid Securities and other debt Securities issued by government bodies, companies and specialist financing vehicles.

We use a bottom up research process to analyse each Security. We undertake additional analysis which allows us to rank each Security on a risk adjusted basis from most preferred to least preferred. We then construct a diversified portfolio containing our most preferred Securities.

Portfolios are constructed based on the research process which identifies a range of Securities that are trading below what we believe to be their fair value.

The weighting of each Security in the portfolio is dependent on its credit quality and term, its relative value and its liquidity. We have constraints in place to ensure that the portfolio demonstrates an acceptable risk/return profile.

The Fund may invest up to 10% of the Fund's Net Asset Value in selected overseas markets where Securities are actively traded. This broadens the Fund's investible universe providing an additional diversification benefit.

Securities in which the Fund invests include:

• Floating Rate Notes;
• Convertible Securities/ Convertible Notes;
• Corporate Bonds;
• Government and Semi (State) Government Securities;
• Subordinated Debt;
• Convertible/Reset) Preference shares;
• Perpetual Securities;
• Cash;
• Other high yielding fixed Income Securities;
• Floating Rate Security;
• Fixed Rate Security;
• Government and semi (State) government Securities;
• Income Security.