The Bond Fund is invested in bonds issued by the Canadian Government, provinces, municipalities and investment quality corporate issues. Government of Canada bonds will always represent a minimum of 40 per cent of the total fund. The average term to maturity and the composition of the portfolio is continuously adjusted to reflect the expected future direction of changes in interest rates. Risks A very high quality portfolio is maintained to reduce the possibility of default on payment by any of the issuers. The main risk in a bond portfolio is with the direction of interest rates.
Bonds have market values similar to stocks.
Bond prices move in the opposite direction to changes in interest rates. Investment Strategy A high quality portfolio is maintained to reduce the possibility of default. Due to the difficulty in predicting the short-term direction for interest rates, no extreme positions are taken. The expected return from the Bond Fund, in any given year, is largely unpredictable due to the uncertain direction of interest rates. All figures expressed in percentage terms.