The funds continue to generate above-inflation income growth in US dollars. This growth has been driven by improved property fundamentals on the back of recent strong economic growth, particularly in the United States. It is anticipated that this income growth is likely to be sustained in the medium-term. The only major profit growth headwind facing real estate companies is higher borrowing costs as globally, central banks continue to tighten monetary policy in the face of rising inflation.
The funds have appreciated by more than 18% (in US dollar terms) since the start of the year, driven primarily by demand for higher yielding securities, as well as an expectation of strong income growth in 2007 and 2008. While lower yields have resulted in an increase in net asset values, the underlying securities in the funds continue to trade at premiums to net asset value in excess of 10% (versus a historical average of around 3%). With the capital values of listed real estate securities susceptible to rising interest rates, we would STRONGLY RECOMMEND THAT INVESTORS CONSIDER SWITCHING OUT OF THE MARRIOTT INTERNATIONAL REAL ESTATE FUND AND INTO THE MARRIOTT INTERNATIONAL INCOME GROWTH FUND.
Based on the current income yield of 4.3% (pre-tax), an expected yield in 5 years time of between 5.5% and 6.0%, with income growth in US dollars of between 4% and 6% per annum, the funds are expected to deliver total returns of between 2% and 6% per annum in US dollars, although short-term volatility may be experienced.

The funds continue to generate above-inflation income growth in US dollars. This growth has been driven by improved property fundamentals on the back of strong economic growth, particularly in the United States. It is anticipated that this income growth is likely to be sustained in the medium-term as consumer spending remains strong (a driver of retail rentals), jobs are created (a driver of office rentals) and there is an increase in global trade (a drive of industrial/warehouse rentals). The only major profit growth headwind facing real estate companies is higher borrowing costs as globally, central banks continue to tighten monetary policy in the face of rising inflation.

The funds have appreciated by more than 10% since the start of the year, driven primarily by demand for higher yielding securities, as well as an expectation of strong income growth in 2007 and 2008. While lower capitalisation rates have resulted in an increase in net asset values, the underlying securities in the funds continue to trade at premiums to net asset value in excess of 10% (versus a historical average of around 3%). At the same time, the initial forward yield of 4.3% is significantly below the long-term average yield for real estate securities in the US, UK and Europe. With the capital values of listed real estate securities susceptible to rising interest rates, we would STRONGLY RECOMMEND THAT INVESTORS CONSIDER SWITCHING OUT OF THE MARRIOTT INTERNATIONAL REAL ESTATE FUND AND INTO THE MARRIOTT INTERNATIONAL INCOME GROWTH FUND.

Based on the current income yield of 4.3% (pre-tax), an expected yield in 5 years time of between 5.5% and 6.0%, with income growth in US dollars of between 4% and 6% per annum, the funds are expected to deliver total returns of between 2% and 6% per annum in US dollars, although short-term volatility may be experienced.

Distribution
The March 2006 distribution amounted to 1.3180c per unit, a significant drop from the previous quarter's distribution, with the last 4 distributions representing a 13.6% decline from the corresponding period last year. There was US dollar income growth on the back of higher market rentals across most property types and in most geographies, reduced vacancies and a focus on cost containment within the real estate securities in the fund. However, the strength of the Rand over the past few years has meant that the distributions from this fund have been declining steadily since the end of 2001.

Future Income
The fund is likely to produce above-average income growth over the medium-term, based on current economic growth projections in the regions in which the fund is primarily invested (i.e. the United States, the United Kingdom and Europe). A growing economy will lead to an increase in consumer spending (good for retail rentals), job creation (good for office rentals) and an increase in global trade (good for industrial/warehouse rentals). The only major headwind facing the real estate securities in the fund is higher borrowing costs as interest rates continue to rise in the US and start rising in Europe. 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) makes forecasting Rand-based distributions extremely difficult.

Capital
Having appreciated by 5% in US dollars in 2005, the fund has gained nearly 10% in US dollars in the first 3 months of 2006. This capital appreciation in listed real estate securities worldwide has been driven primarily by demand for higher-yielding securities, like real estate, as well as an expectation that the developed world's economies would deliver accelerated growth in 2006 and continue that momentum into 2007, thereby improving the fundamentals for commercial property in those regions. While lower capitalisation rates have resulted in a significant increase in net asset values over the past 2 years, the average premium to net asset value of the real estate securities in the fund remains above 10% and the initial forward yield of 4.3% is significantly below the long-term average yield for real estate securities in the US, UK and Europe. With the capital values of listed real estate securities susceptible to rising interest rates, we would STRONGLY RECOMMEND THAT INVESTORS CONSIDER SWITCHING OUT OF THE MARRIOTT GLOBAL REAL ESTATE FUND AND INTO THE MARRIOTT GLOBAL INCOME GROWTH FEEDER FUND.
Based on the current income yield of 4.3% (pre-tax), an expected yield in 5 years time of between 5.5% and 6.0%, with income growth in US dollars of between 4% and 6% per annum, the fund is expected to deliver total returns of between 2% and 6% per annum, although short-term volatility may be experienced and the movements of the Rand versus the world's major currencies will also be a driver of capital values (i.e. when the Rand weakens, prices will rise and when the Rand strengthens, prices will fall - all other things being equal).