The Marriott Global Income Fund is currently yielding 2.3% from a combination of three investment grade Eurobonds and a single Dollar denominated bond fund. Cash weighting in the fund is high - just over 40% is held on short term US Dollar deposit - and to a greater extent this reflects the defensive nature of our current strategy. Most major market bond yields have been compressed by a general flight to safety as the Eurozone crisis has unfolded. Many of the countries in the Eurozone are being belatedly exposed in the wake of the credit crunch. Put simply, these countries have over borrowed and lenders have been too relaxed about the quality of the collateral which, as it turns out, is far less valuable than originally thought. The impact of this problem has naturally been felt by those banks with the greatest exposure to peripheral European debt. Oddly, the Euro has been robust despite these problems thanks to the strength of the German economy. The Fund remains, therefore, defensively positioned in cash and short dated bond issues at least until the latest crisis shows signs of abating. Long fixed interest bonds continue to be undesirable in the light of the crises facing the Eurozone and the delay in the debt ceiling being raised in the USA.

The Marriott Global Income Fund is currently yielding 2.3% from a combination of three investment grade Eurobonds and a single Dollar denominated bond fund. Cash weighting in the fund is high - just over 40% is held on short term US Dollar deposit - and to a greater extent this reflects the defensive nature of our current strategy. Most major market bond yields have been compressed by a general flight to safety as the Eurozone crisis has unfolded. Many of the countries in the Eurozone are being belatedly exposed in the wake of the credit crunch. Put simply, these countries have over borrowed and lenders have been too relaxed about the quality of the collateral which, as it turns out, is far less valuable than originally thought. The impact of this problem has naturally been felt by those banks with the greatest exposure to peripheral European debt. Oddly, the Euro has been robust despite these problems thanks to the strength of the German economy. The Fund remains, therefore, defensively positioned in cash and short dated bond issues at least until the latest crisis shows signs of abating. Long fixed interest bonds continue to be undesirable in the light of the crises facing the Eurozone and the delay in the debt ceiling being raised in the USA.

The Marriott Global Income Fund is currently yielding 2.75% from a portfolio of four investment grade corporate bonds, a single investment into an approved US Dollar denominated money market fund, and cash held on call deposit. The Global Income Fund rose by 0.5% over the quarter to the end of March. Bond markets were weak in March, extending losses to the full calendar quarter. US Treasuries fell by 0.1% extending the fall over the quarter to 0.2%. Sterling gilts, too, fell by 0.8% during the quarter. Only the weakness of the US Dollar during the period helped to push global bond markets into positive territory, recording a gain of 0.5% in Dollar terms but a loss of 1.8% when translated into sterling. We remain very wary of all sovereign debt (excluding inflation proofed issues) and even in the corporate sector, prefer to remain at the shorter end of the yield curve. Earlier in April, the European Central Bank hiked interest rates by 25 basis points to 1.25%. We do not expect the US or the UK to follow any time soon but we are mindful that both markets are now probably closer to a rate rise than at any time since the 2008 credit crisis. Long bonds are also generally undesirable, given the possibility of rate rises and so short dated corporate debt remains the appropriate place in the market to be positioned, in our view. For choice, we prefer sterling in the near term but not yet sufficiently to justify a sterling investment into a Dollar denominated fund whilst the Euro has serious structural deficiencies, making it a high risk option, at least for now.

The Marriott Global Income Fund is currently yielding 3.7% from a portfolio of four investment grade corporate bonds and a small investment in a US Dollar cash fund. After several quarters of falling yields and rising prices, major global bond markets fell back in the final quarter of 2010 as investors reacted to the announcement of a second round of Quantitative Easing. Ten year US Government bond yields quickly moved out from 2.4% to nearly 3.4% in October as concerns rose over the possibility of rising inflation caused by the release of liquidity into the economy and the recognition that, as economic growth accelerates, interest rates are likely to be slowly tightened, possibly as soon as mid 2011. The four bonds held by the Fund are intentionally short dated. Whilst this has a modest effect on running yields (the current yield curve is slightly positive, favouring longer dated issues from a yield perspective) we believe that this is more than adequately offset by the fact that shorter dated issues will be less impacted by higher inflation and rising interest rates, themes which we expect to feature strongly as 2011 progresses. We have also intentionally remained in Dollar denominated issues. Whilst we have the ability in the Fund to buy and hold bonds in other major currencies, none look particularly appealing to us at this stage in the cycle and, given the Dollar denomination of the portfolio, we would prefer to stay currency neutral in the absence of any conviction that holding euros or sterling, for example, would produce a superior return without additional risk.