Cash held in the fund is at the maximum level of 50% and the use of single stock futures has further brought down the effective property exposure to 35%. Our current property sector positioning incorporates industrial, offi ce and retail sectors of approximately 40%, 30% and 30% respectively. Our retail sector exposure remains well below the sector average of approximately 50%. This is in line with Marriott's expectation that the retail sector will struggle as consumers are impacted by a slowing economy. To ensure maximum liquidity for investors, all property funds held within the portfolio have a market capitalisation in excess of R2-billion.

Listed property prices have declined by approximately 6.7% for the first half of 2009 and the conservative positioning of the portfolio has served investors well. Cash held in the fund is at the maximum level of 50% and the use of single stock futures has further brought down the effective property exposure to 35%. Our current property sector positioning incorporates industrial, office and retail sectors of approximately 40%, 30% and 30% respectively. Our retail sector exposure remains well below the sector average of approximately 50%. This is in line with Marriott's expectation that the retail sector will struggle as consumers are impacted by a slowing economy. To ensure maximum liquidity for investors, all property funds held within the portfolio have a market capitalisation in excess of R2-billion.

Future Expectations
In light of South Africa's deteriorating economic environment and relatively low property yields, the fund has been positioned to offer maximum capital protection to capital- sensitive investors. With inflation not yet under control and leading economic indicators suggesting a challenging 2009, property exposure within the fund will be kept to a minimum and hedges will remain in place. Should property prices decline as expected, Marriott would have the opportunity to reinvest some of the fund's large cash holding into the same securities at a higher yield (cheaper income streams).

Listed property prices have been highly volatile during the fi rst quarter of 2009 and the conservative positioning of the portfolio has served investors well. Cash held in the fund is at the maximum level of 50% and the use of single stock futures has further brought down the effective property exposure to 35%. Our current property sector positioning in industrial, offi ce and retail sectors is approximately 40%, 30% and 30% respectively. Our retail sector exposure remains well below the sector average of approximately 50%. This is in line with our expectation that the retail sector will struggle as the consumer is impacted by a slowing economy. To ensure maximum liquidity for investors, all property funds held within the portfolio have a market capitalisation in excess of R2-billion.

Future Expectations
In light of South Africa's deteriorating economic environment and relatively low property yields, the fund has been positioned to offer maximum capital protection to capital- sensitive investors. With infl ation not yet under control and leading economic indicators suggesting a challenging 2009, property exposure within the fund will be kept to the minimum levels and hedges will remain in place. Due to the fund's large cash holding in the portfolio - should prices decline as expected - it would give us the opportunity to reinvest a portion of the cash into property at more appropriate prices. In so doing we would be purchasing the same securities at a higher yield (cheaper income streams).

The portfolio continues to be conservatively positioned to protect capital. Cash positions are at their maximum and the use of single stock futures in the portfolio has brought the effective property exposure to 35%. Listed property prices have been highly volatile. The conservative positioning of the portfolio has protected Investors from this volatility. The fund has experienced a decrease of only 8.7% in price for the year compared with the 12.5% price decline of the South African Property Index (SAPY). We continue to be satisfied with our current property sector positioning in industrial, office and retail sectors of approximately 40%, 30% and 30% respectively. Our retail sector exposure remains well below the sector average of approximately 50%, which is in line with our view that the retail sector will come under pressure as the consumer is impacted by a tougher economic environment. The annual growth in distribution for December 2007 to December 2008 was a 5.5%.

Future Expectations
With inflation not yet under control, and forecasts showing a continued breach of the 3 to 6% target range for longer, we will keep property exposure to the minimum levels. It is difficult to predict the duration and impact of a higher interest rate environment, but the potential risk of such a prolonged period on property prices is significant. We offer a conservative asset allocation focusing on property funds with a market capitalisation in excess of R2-billion and with relatively higher exposure to the industrial and office sector. This has enabled us to decrease our exposure to retail properties. Should prices decline as expected, it would give us the opportunity to reinvest a portion of the cash back into property at more appropriate prices. In so doing we would be purchasing the same securities at a higher yield (and therefore purchasing cheaper income streams).