The reduction in property exposure (Dec2005) to the lowest limits allowed by the fund's respective mandates has helped to protect capital values in the recent downturn. This has had no impact on the quarterly income, which remains predictable and reliable. (Please note: The income from the Marriott Income Fund is affected by interest rate movements.)
With an expectation of further interest rate hikes over the next 6 months, it is likely that we will continue to avoid any long bond exposure and keep property to the minimum levels. In light of this we have further reduced the property exposure in the Core Income Fund from 9% to 3%.
It is difficult to predict the likely impact of further rate hikes on the property market, however we would recommend a conservative asset allocation as negative sentiment could continue to drive prices down. Should this happen, it would give us the opportunity to reinvest a portion of the cash back into property and long bonds at more appropriate prices. In doing so we would be purchasing higher yields (cheaper income streams), which would translate into income growth for investors.

The reduction in property exposure (Dec2005) to the lowest limits allowed by the fund's respective mandates has helped to protect capital values in the recent downturn. This has had no impact on the quarterly income, which remains predictable and reliable. (Please note: The income from the Marriott Income Fund remains dependent on interest rate movement.

With an expectation of further interest rate hikes over the next 6 months, it is likely that we will continue to avoid any long bond exposure and keep property to the minimum levels.

It is difficult to predict the likely impact of further rate hikes on the property market, however we would recommend a conservative asset allocation as negative sentiment could continue to drive prices down. Should this happen, it would give us the opportunity to reinvest a portion of the cash back into property and long bonds at more appropriate prices. In doing so we would be purchasing higher yields (cheaper income streams), which would translate into income growth for investors.

Distribution
The March 2006 distribution amounted to 3.0923 cents per unit (December 2005: 3.0763 cpu), bringing the total distribution for the last four quarters to 12.33 cpu.

Future Income
The current exposure of the fund to listed property remains 20%. The remaining 80% of the portfolio is invested in cash and near cash, being deposits and A rated bonds with a maturity of less than 3 years. With this current asset allocation, income will remain stable over the next few quarters. There will be a negligible change in income should interest rates fall based on the current portfolio.

Capital
As the fund has an 80% exposure to cash and near cash, there is a minimal risk of capital volatility in the portfolio. Previous concerns over the possible volatility of the capital values within this fund have been eliminated.

Distribution
The December 2005 distribution amounted to 3.0763 cents per unit (September 2005: 3.1077 cpu), bringing the total distribution for the last four quarters to 12.3522 cpu.

Future Income
The current exposure of the fund to listed property remains 20%.
The remaining 80% of the portfolio is invested in cash and near cash, being deposits and A rated bonds with a maturity of less than 3 years.
There will be a negligible change in income should interest rates fall based on the current portfolio.

Capital
With the fund now having an 80% exposure to cash and near cash, there is a minimal risk of capital volatility in the portfolio. Previous concerns over the possible volatility of the capital values within this fund have been eliminated.