The Value Line Mutual Fund Survey

Model Portfolio Asset Class-International Bond

International bond funds, up an average of 2.5% for the two months ended February 29, 2008, outperformed all other bond fund categories we follow. Government bond funds, the next best performer, were up 2.1% for the same two months. International bond funds, with a 6% total return for the twelve months ended December 31, 2007, also outpaced all bond fund categories in 2007, with Government bond funds in second place, with a 5.6% total return. International bond funds are attractive to investors for several reasons. Many emerging countries are growing at a rapid rate, yields are often higher than average, and many foreign currencies are appreciating relative to the U.S. dollar. We recommend that International bond funds be part of most investors portfolios, except for aggressive investors with a long time horizon. This month, we will examine several International Bond funds that we follow in the Mutual Fund Survey.

Templeton Global Bond Fund A (TPINX) is best suited for higher-risk investors. The fund seeks current income and capital appreciation through investments in debt securities of companies and governments around the world. Management employs a long-term approach in selecting securities for the portfolio, searching for those that are selling at prices that are below its assessment of their true value. Although it focuses on investment-grade issues, management may buy bonds from any investment category, and up to 25% of assets may be invested in bonds rated below investment grade.

The fund’s total return was 2.1% for the three months ended February 29, 2008, underperforming the Lehman Brothers Aggregate Bond Index, but outperforming more than half of its objective group. Its long-term performance is outstanding, outpacing both its objective group and the Lehman Aggregate Bond Index over the trailing three, five-, 15-, and 20-year periods as of February 29, 2008. To obtain more information on this fund, call (800) 632-2350, or visit the Web site at www.franklintempleton.com.

Investors with slightly less risk tolerance may want to look at American Funds Capital World Bond Fund A (CWBFX). The fund seeks to maximize total return through investments in bonds of global issuers. Although up to 25% of assets may be held in lower-quality issues, the portfolio will typically be composed primarily of investment-grade bonds. Management’s emphasis on high-quality issues effectively restricts investment in most emerging markets. For temporary defensive purposes, management may hold a substantial portion of the portfolio in domestic issues or cash. Under normal conditions, currency hedging is not used.

The fund’s total return was 2.39% for the three-months ended February 29, 2008, slightly underperforming the Lehman Brothers Aggregate Bond Index. Its long-term performance is very good, outpacing both most of its objective group and the Lehman Aggregate Bond Index over the trailing one- , three, five-, ten-, and fifteen-year periods as of February 29, 2008. To obtain more information on this fund, call (800) 421-0180, or visit the Web site at www.americanfunds.com.

Investors with lower risk tolerance may want to look at Eaton Vance Strategic Income Fund B (EVSGX). The fund maintains a barbell structure, normally holding approximately half of its assets in highquality domestic bonds and roughly half in high-yield foreign bonds. Low-grade securities may not exceed 50% of assets. Management may hedge both currencies and U.S. interest rates.

The fund’s total return was 0.64% for the three months ended February 29, 2008, underperforming the Lehman Brothers Aggregate Bond Index. Its long-term performance is good, outperforming the Lehman Aggregate Bond Index over the trailing three- and five-year periods as of February 29, 2008, while outperforming half or more of its objective group during those same timeframes. To obtain more information on this fund, call (800) 225-6265, or visit the Web site at www.eatonvance.com.