1. The distributions that have been declared at the end of September are 17.0952 cents per unit (17.66 cents per unit - June 2002) from the Property Equity Fund and 14.0125 cents per unit (15.09 cents per unit - June 2002) from the Property income fund. The income paid (four distributions including September) to investors over the last year has equated to an income yield in excess of 15% from both of the funds which means that the funds are on target to achieve an average yield of 14,5% for the year ahead.

2. There is no doubt that the direct property market fundamentals are poor. There is excess space in many geographic locations (ie, office space in Sandton). It is for this reason that Marriott expect 0% to 1% growth in earnings over the next year and only 2% to 3% over the next three years. There are other good reasons however to hold a property investment - namely the high income yield - particularly in a potentially declining interest rate environment.

3. Last 12 months - marking time however income remains reliable.
a. The sharp decline in the rand during early December 2001 caused inflation fears and a sharp fall in the value of property stocks.
b. Thereafter, further price depreciation during January and March at the time of the interest rate increases.
c. Price appreciation during April along with a stronger Rand and a general expectation of lower inflation during 2003.
d. Further interest rate increases during June and September had relatively little impact on prices.
e. It is likely that the worst is over.

4. The next two to three years. (one year is too short a period to give reasonable or even likely forecasts).
a. Before giving an opinion as to the likely return that may be expected from listed SA commercial and industrial property over the next two to three years, it is necessary to make certain fundamental assumptions. These relate to the macro-economic variables that influence property prices and rental incomes. These variables are interest rates, inflation and economic growth.
b. Interest rates may rise further in the short term, however the two to three year expectation is that rates will decline - this makes current income yields in excess of 14.5% very attractive, which will ultimately lead to an appreciation in the prices of the securities.
c. Inflation is expected to be relatively high over the next six months, however the reserve bank's inflation target of 3% to 6% is likely to be achieved over the next two to three years. Should this be so, income yields in excess of 14% will again prove to be attractive, leading to upward pressure on the prices.
d. Economic growth over the next 2 to 3 years is expected to be around 3% pa. This is positive for underlying property fundamentals and will ultimately lead to higher rentals which will translate into higher income growth.
e. The income yields on the Marriott Property Funds currently exceed 14%. These are the highest income yields of all SA unit trusts. This yield is historically high for SA property investments.
f. Income for the year ahead is expected to grow at 0% - 1%. This takes into consideration the current weak SA property fundamentals. The average historical income growth has been 7% pa. The current situation should improve over the next two to three years, assuming economic growth.
g. Total returns over the next five years are expected to be in excess of 20% pa. This forecast is based on a 12% to 13% income yield and an annual growth in income of between 2% to 3%. In a declining interest rate environment with reasonable economic growth, these expected total returns are realistic and achievable. Please note that over two thirds of expected total return will be a result of the income yield.
h. In Marriott's opinion, SA Listed property remains a very attractive investment and considering the anticipated lower inflation environment, the expected returns will prove to be exceptional, particularly for an income dependent investor.

The Marriott Property Equity Fund remains open and can take a further R50m only.

During the month of July and August the property prices were relatively stable. The following points outline the property market and the fund manager's expectation of the years ahead:
1. Before giving an opinion as to the likely return that may be expected from listed SA commercial and industrial real estate over the next three to five years, it is necessary to make certain fundamental assumptions. These relate to the macro-economic variables that influence property prices and rental incomes. These variables are interest rates, inflation and economic growth.
2. Interest rates may rise further in the short term, however the two to three year expectation is that rates will decline - this makes current income yields in excess of 14% very attractive, which will ultimately lead to an appreciation in the prices of the securities
3. Inflation is expected to be relatively high over the next six months, however the reserve bank's inflation target of 3% to 6% is likely to be achieved over the next two years. Should this be so, income yields in excess of 14% will again prove to be attractive, leading to upward pressure on the prices.
4. Economic growth over the next two to three years is expected to be around 3% pa. This is positive for underlying property fundamentals and will ultimately lead to higher rentals which will translate into higher income growth.
5. The income yields on the Marriott Property Funds currently exceed 14%. These are the highest income yields of all SA unit trusts. This yield is historically high for SA property investments.
6. Income for the year ahead is expected to grow at 0% - 1%. This takes into consideration the current weak SA property fundamentals. The average historical income growth has been 7% pa. The current situation should improve over the next two to three years, assuming economic growth.
7. Total returns over the next five years are expected to be in excess of 20% pa. This forecast is based on a 12% to 13% income yield and an annual growth in income of between 2% to 3%. In a declining interest rate environment with reasonable economic growth, these expected total returns are realistic and achievable. Please note that two thirds of expected total return will be a result of the income yield.
8. In the fund manager's opinion, SA Listed property remains a very attractive investment and considering the anticipated lower inflation environment, the expected returns will prove to be exceptional, particularly for an income dependent investor.

The six months to the 30th of June 2002 was one of relatively high capital volatility from the listed property markets, which has impacted similarly on the Marriott Property Funds. The first quarter saw a decline in capital values of some 7.5% followed by a recovery of some 3% during the second quarter. The volatility is largely as a result of the collapse of the rand during December, which lead to three interest rate hikes over the six months to June. This turbulence had no impact on the quarterly distribution paid from the funds. The distributions declared at the end of June 2002 were 17.66 cents per unit and 15.10 cents per unit from the Property Equity fund and Property Income Fund respectively. This represents a decline of approximately 6% relative to the March quarter end distribution as a result of a special dividend that was paid during the March quarter. The distributions are however in line with expectations and we remain on course to achieve our expected distributions for the rest of the calendar year. During the month of July the property prices were relatively stable. The following points outline the property market and the fund managers expectation of the years ahead:
1. Before giving an opinion as to the likely return that may be expected from listed SA commercial and industrial real estate over the next three to five years, it is necessary to make certain fundamental assumptions. These relate to the macro-economic variables that influence property prices and rental incomes. These variables are interest rates, inflation and economic growth.
2. Interest rates may rise further in the short term, however the two to three year expectation is that rates will decline - this makes current income yields in excess of 14% very attractive, which will ultimately lead to an appreciation in the prices of the securities
3. Inflation is expected to be relatively high over the next six months, however the reserve bank's inflation target of 3% to 6% is likely to be achieved over the next two years. Should this be so, income yields in excess of 14% will again prove to be attractive, leading to upward pressure on the prices.
4. Economic growth over the next two to three years is expected to be around 3% pa. This is positive for underlying property fundamentals and will ultimately lead to higher rentals, which will translate into higher income growth.
5. The income yields on the Marriott Property Funds currently exceed 14%. These are the highest income yields of all SA unit trusts. This yield is historically high for SA property investments.
6. Income for the year ahead is expected to grow at 1% - 2%. This takes into consideration the current weak SA property fundamentals. The average historical income growth has been 7% pa. The current situation should improve over the next two to three years, assuming economic growth.
7. Total returns over the next five years are expected to be in excess of 20% pa. This forecast is based on a 12% to 13% income yield and an annual growth in income of between 2% to 3%. In a declining interest rate environment with reasonable economic growth, these expected total returns are realistic and achievable.
8. In the fund manager's opinion, SA Listed property remains a very attractive investment and considering the anticipated lower inflation environment, the expected returns will prove to be exceptional, particularly for an income dependent investor.

The six months to the 30th of June 2002 has been one of relatively high capital volatility from the listed property markets, which has impacted similarly on the Marriott Property Funds. The first quarter saw a decline in capital values of some 7.5% followed by a recovery of some 3% during the second quarter. The volatility is largely as a result of the collapse of the Rand during December, which lead to 3 interest rate hikes over the 6 months to June. This turbulence has no impact on the quarterly distribution paid from the funds. The distributions declared at the end of June 2002 are 17.66 cents per unit and 15.10 cents per unit from the Property Equity fund and Property Income Fund respectively. This represents a decline of approximately 6% relative to the March quarter end distribution as a result of a special dividend that was paid during the March quarter. The distributions are however in line with expectations and the fund manager's remain on course to achieve our expected distributions for the rest of the calendar year. The following points outline the property market and our expectation of the years ahead:
1. The income yield currently exceeds 14%. This is the highest income yield of all SA unit trusts. This yield is historically high for SA property investments.
2. Income for the year ahead is expected to grow at 1% - 2%. This takes into consideration the current weak South African property fundamentals. The average historical income growth has been 7% pa.
3. Interest rates are unlikely to rise further in the short term, and the two to three year expectation is that rates will decline - this makes current income yields in excess of 14% very attractive.
4. Inflation is expected to be relatively high over the next 6 months, however, the Reserve Bank's inflation target of 3% to 6% is likely to be achieved over the next two years. Should this be so, a yield in excess of 14% will prove to be attractive.
5. Economic growth over the next two to three years is expected to be around 3% pa. This is positive for underlying property fundamentals and will ultimately lead to higher rentals, which will translate into higher income growth.
6. Total returns over the next five years are expected to be in excess of 20% pa. This view is based on a 12% to 13% income yield per annum and an annual growth in income of 2% to 3%. In a declining interest rate environment with reasonable economic growth, these expected returns are realistic and achievable. Over two thirds of this expected return will result the income yield.
7. In the fund manager's view, SA listed property remains a very attractive investment and considering the anticipated lower inflation environment, the expected returns will prove to be exceptional, particularly for an income dependent investor.

Ongoing securitisation of SA Real Estate allowed Marriott to re-open the Marriott Property funds for a further R100m tranche per fund. The funds will remain fully invested in listed property as per their mandates. The funds are open to all investors including those investing via linked products and new debit orders.

During the last quarter, the capital value of an investment in the Marriott Property Funds has declined by some 10%. This is fundamentally due to the collapse of the Rand during December, which led to two interest rate rises in an attempt by the Reserve Bank to curb future inflation. This does not impact the income as is evident from the distributions at the end of March of 18.8 cents per unit and 16.2 cents per unit from the Property Equity Fund and the Property Income Fund respectively. The following seven points outline the current property market and the fund managers' expectation of the years ahead.
1. The income yield currently exceeds 14%. This is the highest income yield of all SA unit trusts. This yield is historically high for SA property investments.
2. Income for the year is expected to grow 1% - 2%. This takes into consideration the current weak South African property fundamentals. The average historical income growth has been 7% pa.
3. Interest rates may rise further in the short term, however, the two to three year expectation is that rates will decline - this makes current income yields in excess of 14% very attractive.
4. Inflation is expected to be relatively high over the next nine months, however, the Reserve Bank's inflation target of 3% to 6% is likely to be achieved over the next two years. Should this be so, investment return in excess of 14% will prove to be attractive.
5. Economic growth over the next 2 to 3 years is expected to be around 3% pa. This is positive for underlying property fundamentals and will ultimately lead to higher rentals, which in turn will translate into higher income growth.
6. Total returns over the next 5 years are expected to be in excess of 20% pa. This opinion is based on a 12% to 13% income yield per annum and an annual growth in income of between 2% to 4%. In a declining interest rate environment with reasonable economic growth, these expected returns are realistic and achievable.
7. In the fund managers' opinion, SA listed property remains a very attractive investment and considering the anticipated lower inflation environment, the expected returns will prove to be exceptional, particularly for an income dependent investor.

Due to large inflows into the Marriott Property Equity Fund this fund will be closing on the 24 May 2002. Any business that is in the pipeline before the 24 May will be processed up to the 31 May 2002 after which no transactions will be accepted.

The Marriott Property Equity fund is currently 85% invested in listed property stocks. The targeted exposure for the year ahead is 85%. The recent rise in interest rates has negatively affected the listed property prices, however our long term interest rate expectations are still down, considering the Reserve Bank's commitment to lower inflation. We will therefore remain fully invested in property in the year ahead. The fund's expected growth in distribution for the year ahead is likely to be 2%-3%. The current yield in excess of 14% continues to provide a good opportunity to lock in a high income. This combined with a small growth in earnings will continue to provide good returns for the investor.

The Marriott Property Equity fund is currently 84% invested in listed property stocks. The targeted exposure for the year ahead is 85%. The recent rise in interest rates has negatively affected the listed property prices, however our long term interest rate expectations are still down, considering the Reserve Bank's commitment to lower inflation. The fund will therefore remain fully invested in property in the year ahead. The distribution at the end of March 2002 was 18.82 cents per unit producing a distribution for the year of 72.87 cents. The fund's expected growth in distribution for the year ahead is likely to be 2%-3%. The current yield in excess of 14% continues to provide a good opportunity to lock in a high income. This combined with a small growth in earnings will continue to provide good returns for the investor.

The target exposure to listed property stocks for the Marriott Property Equity Fund is 85% and the fund is currently 79% invested. Although the rise in interest rates have negatively affected the listed property prices, the long term interest rate expectations are still down and therefore the fund will remain fully invested in property for the year ahead.

The Marriott Property Equity fund re-opened for new investments on 16 January 2002. New listings in the property market have allowed the fund to re-open for a further R100m tranche.