Axiom European Financial Debt Fund (AXI) is a closed-end fund that invests in European financials regulatory capital. If a bank’s operations and equity position are robust enough to withstand shock asset losses, these instruments can be a way to earn a premium return. Affected by volatile financial markets, AXI posted a negative 8.7% total return over 12 months, outperforming the ICE BofA euro financial and European high- yield indices. The fund has not had any defaults or forced loan to equity conversions. We continue to believe that loan impairments will inevitably rise as economies deteriorate, but this is mostly an equity story and, for the sizeable majority of banks, the regulatory capital instruments (that AXI invests in) will not be called on to absorb asset losses, allowing AXI to benefit from their premium yields. The market distortion means that the portfolio currently has an 11.0% running yield, and 14.7% to perpetuity. AXI is trading on a 9% NAV discount with a 7.2% dividend yield.