Distribution
The March 2005 distribution amounted to 2.1921 cents per unit, a 33% increase over the previous quarter's distribution. The underlying securities in the fund continue to produce strong US dollar income growth, but the volatility of the rand/US dollar exchange rate continues to influence the level of the fund's distribution. The US dollar income growth was achieved on the back of continued strong income growth (through higher rentals) from the fund's retail property exposure, as well as a recovery in the world's industrial property markets as US and global economic growth maintained the momentum established in the second half of 2003.
Future Income
Over the next 3 to 5 years, the fund is likely to deliver US dollar-based income growth of between 4% and 6% per annum. While there is a high degree of certainty attached to our US dollar-based income forecasts, unpredictable and often significant fluctuations in the value of the rand relative to the dollar, euro and pound (the currencies in which the fund is predominantly invested) make forecasting rand-based distributions extremely difficult. Rand weakness will increase the rate of income growth, while rand strength will reduce the rate of income growth and, as has been the case over the past 2 years, even result in income declining.
Capital
After strong US dollar capital gains in 2003 and the first half of 2004, the fund has now experienced US dollar capital declines as the underlying securities in the fund have moved from large premiums to net asset value (as high as 20% at the peak of the market) to the current average premium to net asset value of around 5% (more or less in line with the long-term average for the market). We do however continue to caution investors that while the underlying securities in the fund are no longer trading at large premiums to net asset value, the inverse relationship between interest rates and property prices/values (ie when interest rates rise, property prices/values fall) could lead to further capital declines as the world's central bankers fight rising inflation by raising interest rates.
Based on the current income yield of 5.1% (pre-tax), an expected yield in 5 years time of between 5.8% and 6.2%, with income growth in US dollars of between 4% and 6% per annum, we are forecasting total returns of between 6% and 9% per annum. Investors should be aware that short term capital volatility may be experienced, and that the movements of the rand versus the world's major currencies will also drive capital values (ie when the rand weakens, prices will rise and when the rand strengthens, prices will fall - all other things being equal).

Distribution
The December 2004 distribution amounts to 1.6469 cents per unit, a decrease of 10% over the previous quarter's distribution. The underlying securities in the fund produced strong US dollar income growth, but the continued strength of the rand dragged down the distribution.

Future Income
Over the next 3 to 5 years, the fund is likely to deliver US dollar-based income growth of between 3% and 5% per annum. While there is a high degree of certainty attached to our US dollar-based income forecasts, unpredictable and often significant fluctuations in the value of the Rand relative to the dollar, euro and pound (the currencies in which the fund is predominantly invested) make forecasting rand-based distributions extremely difficult. Rand weakness will increase the rate of income growth, while rand strength will reduce the rate of income growth and, as was the case last year, even result in income declining.

Capital
The fund has experienced short-term capital volatility over the past two years. During 2003 and the first quarter of 2004, the US dollar capital value of the fund appreciated by more than 30% while the income produced by the fund grew by only 7%. This capital appreciation was driven by the securities in the fund moving from discounts to net asset value to premiums to net asset value of up to 15%. In February and March we cautioned investors that short-term capital declines were likely. During April and May the fund did experience declining capital as the value of the securities in the fund moved back in line with net asset values. Since June the fund has once again appreciated significantly. We would caution investors that the underlying securities in the fund are trading at premiums in excess of 20% to net asset value. This may result in further short-term capital volatility. Based on the current income yield of 4.4% (pre-tax), and expected yield in 5 years time of between 5.8% and 6.2% with income growth in US dollars of between 3% and 5% per annum, we are forecasting total returns of between 1% and 4.5% per annum.