The Income Fund returned +0.3% in December, ahead of its benchmark which rose +0.2%.

The fund benefitted from an early call (where a bond is repaid before its maturity date) from Voyage Care, as the business sought to refinance its bond debt with bank debt. As the price was trading below par, this early call saw the value of their bonds increase by roughly 2%. While this was a nice tailwind for December returns, we are sad to see the return of this capital as we have been long-time supporters of their business.

Offsetting this, the fund participated in a new bond issue during the month. TR Group Limited issued a new five-year senior secured bond in December which priced at an attractive yield/interest rate of 5.456%. We think this represents a relatively attractive yield, particularly given the company's strong business and balance sheet profile.

Detractors in December were limited to those bonds which returned slightly less than the overall fund return. Positions like those from Contact Energy and Watercare returned between 0% and 0.1%, creating a drag on performance. In both cases there were no fundamental results or operational changes, so we remain happy holders of these positions.