The fund posted a return of -2.70% in September and is up 1.02% over the past 12 months.

September was a weak month for European investment-grade bonds. Geopolitical turmoil in the Middle East has pushed up energy prices and heightened fears of inflation. Monetary policy became a key issue, and central banks in the U.S., Europe, and Norway all raised their benchmark interest rates by 25 basis points during the month.

The world’s most important interest rate—the U.S. 10-year Treasury yield—rose from 4.8 to 5.3 percent in September. This is the highest level since 2007 and the largest monthly increase in four years. Yields have been rising since the Iran conflict broke out in February, and in addition to higher energy prices, significant borrowing needs among AI companies, a national debt exceeding $40,000 billion, and strong growth indicators have intensified selling pressure. Interest rates also rose in Europe, and the five-year euro yield has increased by nearly 0.9 percentage points since the summer.

Higher interest rates affect the fund in two ways. The value of existing bonds falls when market interest rates rise, and the rise in interest rates accounts for about 1.5 percentage points of the decline in September. In addition, credit spreads widened, with the financial and real estate sectors contributing the most to the decline. The decline was due to market movements rather than problems at individual companies, and interest income made a positive contribution throughout the month.

Nothing fundamental has changed in our view of the companies we own. We have been through similar periods before, and we use these fluctuations to adjust the portfolio where prices are most attractive. Historically, declines caused by market turbulence have been recouped through interest income and share price gains. We do not know how long it will take this time, but the decline in share prices has given the fund a higher interest rate, which, for the long-term investor, will provide a good current return going forward.

As of the end of the month, the fund has a current yield of 6.38%* and an yield to maturity of 7.25%.*

*Before costs related to management. Will be subject to change from day to day, and is therefore no guarantee of the return in the period for which it is calculated.

Sincerely

Øivind Thorstensen & Simen Aarsland Øgreid