Charities Aid FoundationBond Income Fund

Robert McHenry

20 May 2008

2P7958

Presenter

Robert McHenry Fixed Income Product Manager

3P7958

Insight: autonomy with strong financial backing

T0003

• The autonomous asset management company of the HBOS Group

• HBOS: A strong and committed parent– AA- credit rating1

– Aa1 credit rating2

– 15th largest UK company by market capitalisation3

• £109 billion assets under management4

• A focus on excellence in key areas• An approach that emphasises delivering high quality solutions

for our clients

1 Source: Standard & Poor’s as at 30 June 20072 Moody’s as at 20 April 20073

Source: Bloomberg as at 30 November 20074

Source: Insight Investment as at 31 March 2008

4P7958

Charities Aid FoundationBond Income Fund

• Benchmark: 75% FTSE All Stocks Gilt Index25% Merrill Lynch Sterling Non-Gilts

Index

• Fund objective: To provide high and consistent levels of income with low capital volatility

• Investment objective: To outperform the benchmark by 0.75% per annum over rolling three year periods, gross of fees

• Income: Now distributed on an effective yield basis

Investment Philosophy & Process

6P7958

Diversification

Spreading Investments

Precision

Targeting Investments

Consistentperformance=+

Investment philosophy

• We aim to provide consistency in the generation of performance

T0008

7P7958

Investment philosophyDiversification

• Generating higher and more consistent returns over time

• We use a wide range of different opportunities

• We avoid concentration of risk

Market allocation

Duration and yield curve

Credit strategy

Security selection

Currency selection

Integrated Decision Making

CAF Bond Income Fund

T0008

Performance

9P7958

Performance to 31 March 2008

Performance of the Fund is based on an Offer to Offer basis. Insight Investment assumed management of the Fund on 1 February 2006. Periods greater than 1 year are annualised.

Source: Russell/Mellon CAPS and RIMES

Fund (%) Benchmark (%)

1 year 4.48 5.42

3 years 4.17 4.50

5 years 4.09 4.19

1 year Attribution to 31 March 2008

Source: Insight InvestmentNote: Estimated attribution

-21

14

161

-68

-157-160-120

-80-40

04080

120160bps

Market allocation Duration Yield curve Sector Stock selection

Market review

11P7958

UK government bonds

• Yield decline was good for fund performance

UK Gilt Yields

3.5

4

4.5

5

5.5

6

Apr-07

May-07

Jun-07

Jul-07

Aug-07

Sep-07

Oct-07

Nov-07

Dec-07

Jan-08

Feb-08

Mar-08

Apr-08

May-08

UK Gilt 2 year yield UK Gilt 10 year yield UK Gilt 30 year yield

Q2 2007 Yields rose Subsequently

yields fell

12P7958

UK Yield Curve

• Being Underweight very long dated bonds was good for performance

3.5

4

4.5

5

5.5

6

Ap

r-07

May

-07

Jun

-07

Jul-

07

Au

g-0

7

Sep

-07

Oct

-07

No

v-07

Dec

-07

Jan

-08

Feb

-08

Mar

-08

Ap

r-08

May

-08

-0.8

-0.6

-0.4

-0.2

0

0.2

0.4

0.6

UK Gilt 2 year yield

UK Gilt 10 year yield

Yield difference between 2 year and 10 year

Yield % Yield difference %

3.5

4

4.5

5

5.5

6

Ap

r-07

May

-07

Jun

-07

Jul-

07

Au

g-0

7

Sep

-07

Oct

-07

No

v-07

Dec

-07

Jan

-08

Feb

-08

Mar

-08

Ap

r-08

May

-08

-0.2

-0.1

0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

UK Gilt 10 year yield

UK Gilt 30 year yield

Yield difference between 10 year and 30 year

Yield % Yield difference %

13P7958

Credit Markets

• Credit markets spreads widened dramatically during last 12 months

• Financials suffered more than most sectors

• Our allocations here were a negative for performance

-50

0

50

100

150

200

250

300

Jan

-03

Ap

r-03

Jul-

03

Oct

-03

Jan

-04

Ap

r-04

Jul-

04

Oct

-04

Jan

-05

Ap

r-05

Jul-

05

Oct

-05

Jan

-06

Ap

r-06

Jul-

06

Oct

-06

Jan

-07

Ap

r-07

Jul-

07

Oct

-07

Jan

-08

Ap

r-08

AAA AAA BBB

14P7958

Security Selection

Northern Rock Saphir Fin Perp 2016 (Tier1) vs Northern Rock 2015 (Lower Tier 2)

Source: Bloomberg

0

20

40

60

80

100

120

Mar-07 Jun-07 Sep-07 Dec-07 Mar-08

T1 bond Lower Tier 2 bond

• Having some Northern Rock was a negative for performance

15P7958

Investment outlookOur views: UK Economy

Source: Bloomberg

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

Dec-98 Dec-00 Dec-02 Dec-04 Dec-06 Dec-08

CPI Forecast path

UK inflation - CPI measure (yoy%)

2008 2009 2008 2009

UK 2.0 1.8 1.9 1.8

Eurozone 1.5 1.9 2.4 1.9

US 1.5 2.0 2.5 2.5

Japan 1.5 1.7 0.2 0.4

GDP(%) Core Inflation (%)

Economic forecasts for 2008/2009

• Period of more modest economic activity

• Situation remains fragile

16P7958

Investment outlookOur views: Market Forecast

12-month market forecast: bonds

*For the UK, we forecast the repo rate rather than 3-month interest ratesSource: Insight

3-month

interest 2-year 5-year 10-year 30-year 50-year

rates yield yield yield yield yield

UK Current 5.25 3.72 3.93 4.35 4.34 4.22 Forecast * 4.75 4.75 4.70 4.50 4.35 4.25US Current 2.69 1.56 2.45 3.60 4.29 - Forecast 2.25 2.30 3.20 4.25 4.85 -Euro Current 4.73 3.52 3.69 4.04 4.62 - Forecast 3.70 3.60 3.70 4.00 4.40 -Japan Current 0.91 0.59 0.75 1.29 2.45 - Forecast 0.70 0.80 1.10 1.55 2.15 -

• We expect longer dated yields to remain close to current levels

• UK curve to remain inverted at the long end

17P7958

Investment outlookOur views: UK Government Bonds

Source: Bloomberg

3.50

3.75

4.00

4.25

4.50

4.75

5.00

2 years 5 years 10 years 20 years 30 years 40 years 50 years

Current yield curve Insight forecast

UK government yield curve vs Insight forecasts (%)

• We do not see good value in gilts at short maturities

18P7958

Investment outlookOur views: UK Corporate Bonds

Global credit default rates (%) AAA UK RMBS spread over LIBOR (bps)

Source: Deutsche Bank Source: Market iBoxx, UBS Delta

0

20

40

60

80

100

120

140

160

180

200

Mar-03 Mar-04 Mar-05 Mar-06 Mar-07 Mar-08

Spread over LIBOR

0%

2%

4%

6%

8%

10%

12%

14%

Dec-87 Dec-90 Dec-93 Dec-96 Dec-99 Dec-02 Dec-05 Dec-08

Global actual forecast path

• Good value appearing in investment grade market

• Improvement in the liquidity landscape

19P7958

NotesPlease note:• All features in this pack are current at the time of publication but may be subject to change in the future.• Unless otherwise stated, the source of information is Insight Investment. Any forecasts or opinions are Insight Investment’s own at the date of this document and may

change. They should not be regarded as a guarantee of future performance.• This document is intended for investment professionals only and should not be relied upon by private investors. No modifications or amendments to this presentation may

be made without the prior permission of Insight Investment. The document is to be used by the intended recipient(s) only and the document may not be forwarded to a third party without prior consent from Insight Investment.

• Depending on the investor’s currency of reference, currency fluctuations may adversely affect the value of investments and the income therefrom. • Past performance is not a guide to future performance.• Unit prices may go down as well as up, particularly in the short term. The value of an investment may fluctuate and cannot be guaranteed. Where applicable, unless

otherwise indicated, the performance of the pooled funds illustrated is calculated on an offer to offer basis with income reinvested and net of management charges. • Trading in derivative instruments may involve a higher degree of risk and there can be no assurance that the objectives of the portfolio will be attained. • Telephone calls may be recorded.

Disclaimer• This document is for information purposes only. No party shall have any right of action against Insight in relation to the accuracy or completeness of the information

contained in it, or any other written or oral information made available in connection with it. Any investment advice that we provide to you is based solely on the limited initial information which you have provided to us. Notwithstanding that Insight may have reviewed the Statement of Investment Principles of any relevant trust, no part of any document or presentation provided by us prior to our formal appointment as discretionary investment manager by way of written agreement shall be deemed to constitute "proper advice" for the purposes of the Pensions Act 1995 (as amended). Any limited initial advice given will be further discussed and negotiated in order to agree formal investment guidelines which will form part of a written investment management agreement between the parties.

Issued by Insight Investment • Insight Investment Management (Global) Limited, Clerical Medical Investment Group Limited and Clerical Medical Managed Funds Limited are authorised and regulated

by the Financial Services Authority and are part of the HBOS Group. All companies registered in England and Wales. Registered office 33 Old Broad Street, London EC2N 1HZ.

• Notes for clients and prospects of Insight Investment Funds Management Limited: Issued by Insight Investment Management (Global) Limited, on behalf of . Insight Investment Funds Management Limited, Reg. No. 1835691. Insight Investment Management (Global) Limited, Reg. No. 00827982.

• Notes for clients and prospects of Clerical Medical Investment Group Limited: Issued by Insight Investment Management (Global) Limited on behalf of Clerical Medical Investment Group Limited. Clerical Medical Investment Group Limited, Reg. No. 03196171. Insight Investment Management (Global) Limited, Reg. No. 00827982.

• Notes for clients and prospects of Clerical Medical Managed Funds Limited: Issued by Insight Investment Management (Global) Limited on behalf of Clerical Medical Managed Funds Limited. Insight Investment Management (Global) Limited. Reg. No. 00827982. Clerical Medical Managed Funds Limited, Reg. No. 01580284.

T0004