The Core Income Fund distributed 2.6696cpu in September. The portfolio continues to produce a high and consistent distribution and includes cash, premium deposits, corporate debt, preference shares, inflation linked bonds and high yielding equities. Equities in the portfolio include Vodacom, MTN, Altech and Liberty Holdings.

Equities may not be considered a 'traditional' asset class for 'income' type funds, however, when one looks at the nature of the income stream currently being produced by these companies their inclusion fits with Marriott's Income Focused Investment Style.

o Vodacom, MTN and Altech form part of the telecommunication industry. Telecommunication companies earnings are derived from a multitude of secure contracts making them an ideal source of reliable income.
o Liberty Holdings is predominately a life insurer. The life insurance industry derives its income from recurring premiums and is not capital intensive. As a result life insurers are able to generate significant cash flows and hence reliable dividends.

The forward yields of Vodacom, MTN, Altech and Liberty Holdings compare favourably to current cash interest rates. On an after tax basis the yields of these securities are even more attractive. There is also the potential for a re-rating of these income streams which may contribute positively to the total return of the two funds.

Investors should note that The Marriott High Income Fund is currently producing returns in line with Money market. Although the recent inclusion of high yielding companies has improved the return outlook for the fund investors we recommend that draw as close to money market rates (5.5 to 6%) as possible to ensure capital stability.

The fund changed sectors from Domestic--Fixed Interest--Varied Specialist to Domestic--Asset Allocation--Flexible on 14 Sep 2011

The Marriott Core Income Fund distributed 2.6743 cpu in June. The portfolio continues to produce a high and consistent distribution and includes cash, premium deposits, corporate debt, preference shares, inflation linked bonds and high yielding equities.

The equities recently added to the portfolio include Vodacom, MTN and Altech. They are all trading on unusually high dividend yields (in line with current cash interest rates). Telecommunication companies earnings are derived from multitudes of contracts making them an ideal source of reliable income for retired investors. The potential for a re-rating of these income streams should contribute positively to the total return of the fund over time.

Investors should note that The Marriott Core Income Fund is currently producing returns in line with Money market. Although the recent inclusion of high yielding companies has improved the return outlook for the fund investors we recommend that draw as close to money market rates (5.5 to 6%) as possible to ensure capital stability.

The Core Income Fund distributed 2.6068cpu in March. The portfolio is structured to continue to produce a relatively high and consistent distribution and includes cash and premium deposits, corporate debt, preference shares and inflation linked bonds.

Throughout 2010 the Marriott High Income Fund has produced returns in line with money market instruments. Investors who have drawn more income than money market rates have experienced a small decline in capital value.

The year ahead is likely to be characterised by rising inflation, higher interest rates, a consumer under pressure and a downward adjustment of many asset prices. Assuming rising inflation, it is anticipated that the instruments in this portfolios will produce more income and have growth in capital values.

We look forward to re-investing in property and long bonds as these are the instruments that offer retired investors the most secure and reliable long term income. They will however only be included when the income streams are appropriately priced with yields reflecting higher inflation.

The target asset allocation is: o Floating rate corporate debt 20% o Listed preference shares 10% o Structured NCD's 30% o Inflation linked bonds 20% o Cash 20%

It must be noted that as the portfolio now includes instruments that are priced in the market the price of the units can now move up or down.

The Marriott Core Income Fund distributed 2.6542 c.p.u in December 2010. The portfolio has been restructured in order to continue to produce a relatively high and consistent distribution. In addition to the cash and premium NCD instruments, the portfolio now includes floating corporate debt, preference shares and inflation-linked bonds.

Floating corporate debt provides a higher yield than cash and the additional credit risk has been managed by loaning only to those companies in which Marriott is currently invested in our equity and property portfolios. The capital value of the debt is unaffected by changes to interest rates as it readjusts to current rates every 3 months.

Listed preference shares also provide a relatively high yield with the opportunity of capital gain should these current yields return to their lower long term averages.

Inflation-linked bonds when linked with premium NCD's, offer higher levels of income than cash as well as low capital volatility and a known real return (return in excess of inflation) if held to maturity.

The attached pie chart shows the current levels of these instruments. The target asset allocation is:

o Floating rate corporate debt 20%
o Listed preference shares 10%
o Structured NCD's 30%
o Inflation linked bonds 20%
o Cash 20%

Property and long bonds yields are well below their historic averages and will only be included when the opportunity for capital gains outweighs the risk of capital loss.

It must be noted that as the portfolio now includes instruments that are priced in the market the price of the units can now move up or down.

The effect of the September interest rate reduction will result in the yield reducing to 8.7%. Although it has become necessary to reduce the distributions, we are still confident that the asset allocation is appropriate and that the expected return for the year ending May 2011 remains between 7% and 9.5%.