April 21st, 2014

Income Review

Cumberland Income Fund First Quarter 2014 Review and Outlook

The Cumberland Income Fund gained +2.1% during the first quarter of 2014 compared to the gain of +2.8% posted by the FTSE TMX Canada Universe Bond Index during the same period. On a year over year basis, the Fund has gained +4.7% while the FTSE TMX Index has gained +0.8%. There was a “flight to safety” tone in the bond market during the quarter, triggered by weaker than expected economic data and geopolitical concerns, resulting in declining interest rates (bond yields) and consequently higher bond prices. These concerns were partially offset by a signal from the U.S. Federal Reserve that the interest rate tightening cycle may start earlier than expected. At Cumberland, we continue to maintain our view that bond yields will drift higher over the medium term putting downward pressure on bond prices, brought about by a gradually improving global economy and the Federal Reserve’s gradual exit from its bond buying program (Quantitative Easing or QE). Consistent with our strategy in recent quarters we have maintained our focus on preserving capital by keeping the Fund’s duration low (thereby keeping the sensitivity of bond price changes due to changes in interest rates low). Moreover, the Fund continues to generate income by holding higher-yielding corporate bonds, preferred shares, and dividend-paying common equities that have attractive risk/reward characteristics, in our view.