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Marriott International Real Estate Fund Marriott International Funds Plc. Marriott International Real Estate Fund News Marriott Int Real Estate comment - Mar 19 Monday, 10 June 2019 Fund Manager Comment Real Estate Investment Trusts (REITs) have been on something of a roll over the year to date. In part, much of the performance has been no more than a retracing of the falls experienced at the end of 2018, but the recovery is welcome, nonetheless. The main reason behind the recovery has been the tempering of expectations for interest rate rises in the US. The explanation for last year's market falls has been the main reason for this year's rise. Like it or not, the US Federal Reserve Bank is still the leading influencer on global monetary policy. In 2018, higher US interest rates badly affected nearly all market classes. This year, the Fed's policy U-turn has had the opposite effect. Last December's 'dot-plot' projection for two interest rate hikes in 2019 has been changed to precisely none. The Fed now expects just one quarter point rise in 2021. Markets (the ultimate judge and jury) actually think that the Fed could even cut rates later this year. Consequently, interest-sensitive sectors like property are back in fashion, as investors pursue yield, safe in the knowledge that they are not going to be caught out by a sudden change of heart by the central banks. The reason behind the change in central bank forecasts has been officially attributed to slowing economic growth. The latest GDP figures vindicate this stance with the most recent release suggesting that the US is now growing by 2.9% annually. The latest quarterly figure of 2.6% marks a slowdown in growth from 3.4% in the previous quarter and 4.2% the quarter before that. The trade dispute with China cannot have helped, nor can the US Federal Government shut-down at the start of the year. Either way, rates don't look like they are moving higher any time soon, which will please President Trump who appears to have got his own way, if only by default. Results released in the first part of 2019 have also been consistently fine to date. Most companies have met expectations. This is no great surprise as REIT results tend to be both stable and predictable. Dividends have only inched higher, however, as companies remain wary of increasing payouts unless they are firmly covered by earnings. Those companies who have increased debt have been duly punished by the market, almost exclusively in the retail sector where trading remains grim. The reporting season has been a story of haves and have nots, with industrial warehouses still setting the pace but shopping malls and strips lagging badly. Intu, the UK shopping mall company (formerly known as Liberty International), which we don't own, has had a particularly torrid time as store closures affected income and mall valuations leading to a dividend cut and further revaluations. This theme has further to play out as the shopping sector remains oversupplied, retailers are struggling and e-commerce continues to gain traction. At some point, this will be a buying opportunity, but not just yet.   Marriott Int Real Estate comment - Jun 16 Wednesday, 12 October 2016 Fund Manager Comment The decision by a narrow majority of the UK electorate to leave the EU has shaken the UK property market. Yields have risen and share prices have fallen as investors have taken the view that a mass exodus of workers from London offices is likely. Property prices have fallen across the board but the worst hit have been the London centric specialists such as British Land. The reality, as ever, is likely to be more complex. Although immigration played a key role in shaping the outcome of the referendum, any changes to the rules if and when the UK does leave the EU are unlikely to have a major impact on those European professionals working in the City. And any business looking to relocate elsewhere in Europe may find that things aren't quite as rosy on the other side of La Manche even in a post-Brexit world. Nonetheless, the Brexit result has injected a serious amount of uncertainty into a market place which was already wobbling in the wake of UK Chancellor George Osborne's increase in stamp duty. This had the instant effect of reducing the number of transactions on the UK secondary market, both commercial and residential. The London housing market was already showing signs of overheating; natural buyers at the higher end have been declining in tandem with the oil price and this market may be difficult for a while longer. The UK property companies into which we invest are diverse and have long lease lengths with good quality tenants. Typically, they are priced at around a 20% discount to underlying assets with excellent dividend yields. Whilst sentiment plays a key role in any property market, we don't share the Armageddon view taken by a number of analysts, not least because we believe that the EU saga has much further to run. If anything, we are a little more concerned about the impact of Brexit on Europe which remains in a more perilous state than the UK on most economic metrics. The US, of course, continues to plough its own furrow. The US REIT sector has been relatively strong, year to date, and in the absence of any interest rate hikes this year, is likely to remain so. Overall, the Marriott International Real Estate Fund gained 2.9% over the second quarter of 2016 in US Dollar terms; year to date, the Fund has now gained 7.3%. Despite the post-Brexit blues, these gains have been driven by strength in the US market in particular, where interest rate rises in 2016 now look unlikely, especially with a US election looming large. We went into Brexit with a high cash balance and have been slowly investing cash to take advantage of better yields and the strong dollar. Whilst this is a contrarian view, it just may be that the UK thrives in the new climate and that investment will return to the UK as quickly as it appears to have dissipated.   Marriott Int Real Estate comment - Jun 14 Friday, 29 August 2014 Fund Manager Comment Property shares, measured by the MSCI Global REIT index, consolidated their recent gains with a rise of 7.2% in the second quarter of 2014. This lifted the gain, year-to-date, to 13.6%, well ahead of the broader equity indices in all major markets. The Marriott International Real Estate Fund tracked this gain with a year-to-date rise of 13.5%. It is noteworthy that, against general expectations, bond (fixed interest) markets have also been strong in 2014, despite the threat of higher interest rates and the ongoing tapering of quantitative easing in the US. Neither event is especially supportive to property shares, but investors are still hungry for yield. Interest rate hikes, when they do arrive, are likely to be in 0.25% incremental shifts and phased in over a period of time, maybe even years. Base rates are, therefore, likely to remain below historic averages for the foreseeable future and so it is the sentiment of the upward move in rates rather than the actual cost to businesses which is likely to influence investors over the months ahead. Whilst the US has remained reasonably constant in guiding the market towards a likely rate hike in 2015, newly elected Governor of the Bank of England, Mark Carney, has sent out mixed messages, leading a member of the UK's Treasury Select Committee, Pat McFadden, to describe him as an 'unreliable boyfriend'. Mr McFadden has a daughter and 6 siblings, so presumably speaks from experience. The point is that no one knows for sure when the Bank of England intends to make its first move. Autumn 2014 seems the most likely date, but we still wonder whether or not a rate hike will happen this side of the 2015 UK General Elections. The decision may yet be impacted by the referendum on an independent Scotland due in September but, in truth, nobody knows, not even the Governor. Either way, property markets have treated all of the vapidity with indifference. It should come as no surprise when rates do start to move higher and that, perhaps, is the point of the whole exercise. On the corporate front, the news is rather more interesting. The shareholder spat over the division of the Westfield Group into two parts has been finally resolved. Westfield will now own shopping malls in the US and Europe whilst the Australasian properties will be held in a new company (Scentre Group). We remain long term holders of the Westfield Group but the initial attitude of the Westfield management towards dissenting minority shareholders has not been the best example of good corporate governance. Elsewhere, Land Securities have bought a 30% stake in the Bluewater shopping centre in Kent from rival Australian property developer Lend Lease Corporation. Lend Lease have made a significant profit from this investment and it is a surprise that Land Securities have chosen to buy in at this stage of the cycle for an estimated yield of 4.1%. However, Bluewater has potential for rental growth and Land Securities are leading experts in this area. We are long term holders of Land Securities whose management team has an impressive track record. We would not bet against them. The immediate outlook for property markets will be determined above all by interest rates. It may, however, also be driven by the ongoing search for portfolio diversification. With this in mind, Norway's $887bn state pension fund has announced that it is looking to boost its investment in real estate markets. Norges Investment Bank (their investment manager) plans to increase real estate exposure in the fund by 1% every year through to 2016. Such a move would take property up to 5% of its total portfolio, from just 1.2% last year, with the emphasis on London and Paris (Europe) and New York, Washington, Boston and San Francisco (US) - e.g. "prime" locations; a very similar macro strategy to our own.   Marriott Int Real Estate comment - Mar 14 Thursday, 5 June 2014 Fund Manager Comment Property shares generally underperformed a falling equity market in the first quarter of 2014. Technically, there was no good reason behind this other than that the events unfolding in Crimea meant that this was generally a 'risk off' quarter and the smaller average capitalisation size of property shares as an asset class meant that the downside reaction was exaggerated. Investors are, however, still concerned about the impact of higher rates on the sector. Newly installed Fed chairman Janet Yellen did little to dispel the uncertainty earlier in the month but we remain of the view that when it happens, rates will be raised in a controlled and steady manner. Once markets have adapted to the early realisation that the theoretical has turned into the practical, then we expect the sector reaction to eventually turn positive, much like the reaction to the end of Quantitative Easing in the US. Otherwise, results from major property REITS continue to trickle down in a positive manner with few shocks, befitting to a market now well into recovery mode. As before, the UK looks to be the brightest star with London centric companies firing on all cylinders. The London effect will gradually ripple upwards and westwards into the rest of the UK, maybe even in time for the 2015 general election but probably too late for the Scottish vote. The US too remains in a steady holding pattern, as does Europe, albeit thanks to an entirely different set of circumstances. Only emerging markets, where we have minimal exposure, remain steadfastly in the doldrums with the events in Ukraine unlikely to change investors' mind sets any time soon. There have been minimal changes made to the fund during the quarter. Results have been generally in line with expectations and we have seen dividend increases across the board, albeit still not at the rate which we became used to prior to the 2008 banking crisis. Whilst the US and UK are in a pattern of accelerating growth, in Europe the recovery situation remains very patchy. Given the domestic nature of the property market, we remain extremely selective in this area with investments confined to carefully chosen Swedish and German property companies in specific areas of interest and a single French company, Unibail Rodamco, whose track record during and after the banking crisis has been exemplary.   Marriott Int Real Estate comment - Sep 13 Monday, 30 December 2013 Fund Manager Comment Property shares have had a disappointing quarter relative to the wider equity market. The cause has been the performance of bond markets where yields have risen in anticipation (prematurely, as things turned out) of the tapering of Quantitative Easing. In theory, this pushes up borrowing costs for real estate businesses and puts pressure on rental yields which are often set with reference to prevailing government bond yields. In practice, most of the companies in the Fund have extremely solid balance sheets and high occupancy rates. Many tenants are locked into fixed or even rising rental agreements, so the impact of higher bond yields is not felt immediately, if at all. A more likely issue for property companies has been the greater attraction of government bonds, from a yield perspective, after the latest setback. With both UK and US benchmark government bond yields flirting with the 3% level, net yields offered by many major US property companies are only fractionally higher but with a greater element of risk. On the other hand, bonds (other than pricey inflation proofed issues where yields are really low) neither offer a rising income stream nor the potential for growth. Nor do they offer diversification. The only real candidates for such investments right now are pension funds, who have a strict mandate to match future liabilities with known income streams today. In almost every other regard, property shares are the more attractive asset class for the medium and long term, if one can live with the added volatility of equity ownership. After the recent setback, prices and yields in this sector are looking attractive once again. Companies have been steadily increasing dividend payouts whilst few are reporting significant, if any, distress patterns from their underlying tenant base. Central London has remained especially strong thanks to a shortage of space and opportunities for redevelopment. Improving retail sales on both sides of the Atlantic will help the major shopping malls in the portfolio whilst companies providing ancillary services such as the industrial major Prologis should also benefit from the ongoing economic and corporate recovery. Once the market has come to terms with the world post QE, we expect some form of upward re-rating to the property sector as investors recognise and return to the yield and inflation proofed qualities offered by those companies typical of the sort held by this Fund.   Marriott Int Real Estate comment - Jun 13 Wednesday, 18 September 2013 Fund Manager Comment The Marriott International Real Estate Fund fell by 4.1% in dollar terms in June bringing the fall over the course of 2013 to date to 0.1%. The industry benchmark Global Property Research 250 Index fell by 2.4% in Dollar terms during the month, losing some of the momentum built up earlier in the year and leaving year-to-date gains at 3%. The Fund remained consistently above its yield benchmark throughout the period, ending the quarter with a gross yield of 4% ahead of the 2.2% composite benchmark drawn from the JP Morgan Global Government Bond Index. US Real Estate Investment Trusts (REITs) weakened during the month as US Treasury yields rose on worries that the Federal Reserve Bank was considering tapering off its programme of Quantitative Easing, buying bonds in exchange for improved liquidity in the banking system. By the end of June, US 10 year Treasury yields had risen to 2.5% from a low point of 1.6% just a few weeks earlier. This led to a sell off across the investable universe, from bonds to equities, commodities and even gold as investors reined in borrowing in anticipation of higher interest rates and shifted into short-term risk free assets (cash). Whilst we remain wary of bond markets, we believe that equity markets will quickly regain upwards momentum once the shock of the possible tapering of QE has been fully absorbed. REITs and property companies in general have a closer correlation to lending rates than other equity sectors, hence the initial reaction to the possibility of higher interest rates in the US by the sector, which underperformed the broad equity market by 1%, peak to trough during the recent correction. However, the lengthy period of low rates in the wake of the banking crisis gave many REITs the opportunity to restructure their balance sheets and reduce their interest payments. For the best companies in the sector, any upturn in rates in the near term will not have the impact it might have had in previous rate cycles. Elsewhere, commercial property markets are showing signs of improvement, in line with the broader economy. Vacancy rates continue to fall and in most of the major central business districts around the world, demand for high quality property remains good with the exception of the Eurozone (ex-Germany) where high unemployment rates and falling GDP continue to take their toll on most areas of the market. Excellent results from our central London specialists British Land and Land Securities in May underlined the strength of the commercial property market in the city. The supply of good quality office and retail space in this area remains close to all-time lows and is severely restricted by planning conditions preventing easy development. As yet, such strength has yet to reach the rest of the UK which remains lacklustre at best. As we reported in May, there has been a notable increase in activity in the industrial sub-sector of the market where operators such as Prologis and Segro are well positioned to take advantage of growing demand for their warehouse space which is typically strategically positioned near to major airport and other transport hubs. We expect equity markets to stabilise quite quickly following the recent sell off. Nothing has really changed other than the realisation that lending rates cannot remain low forever. The Fed has now put a draft timetable on the course of action over the next couple of years which is probably not good news for long term bond investors but bodes well for equity investors if world GDP growth can continue to accelerate from current levels.   Marriott Int Real Estate comment - Mar 13 Thursday, 23 May 2013 Fund Manager Comment The Marriott International Real Estate Fund gained 1.1% in dollar terms during the first quarter of 2013. This performance reflected a generally strong period for global equity markets whilst a number of other asset classes, notably government bonds, lost ground. Performance was distorted to some extent by currency movements, in particular, the strength of the US Dollar which gained nearly 7% against sterling since the start of the year flattering returns from internationally diversified portfolios measured in sterling but having the opposite effect on dollar denominated accounts. Global equities rose by 14% during the quarter led by the US and Japan. Once again, emerging markets were relative laggards gaining just 4.8% in sterling terms over the same period. The Fund remained consistently above its yield benchmark throughout the period ending the quarter with a gross yield of 3.7%, ahead of the 1.7% composite benchmark drawn from the JP Morgan Global Government Bond Index. Quoted real estate generally underperformed the wider market in the first quarter of 2013. As far as the Fund is concerned, some of this can be attributed to currency movements - many of the underlying Fund holdings are quite domestic in their nature, in contrast to the growing international sales base of other non-property market constituents. Property is also typically a late cyclical asset class and we expect some catch up in the second quarter of 2013 if, as we anticipate, global equities extend their recent strong run. Individual company news has been good during the last few weeks. Numbers from some of our core holdings in the likes of Unibail-Rodamco and British Land have underscored our desire to expose the fund exclusively to leading management teams in their respective sectors. This emphases our belief that the pause in the property sector rally is temporary and expect it to resume, especially as investors rotate out of those sectors which have out-performed during the latest rally. The strength of the equity market was at odds with the disappointing economic news from the UK and, in particular, the Eurozone. China, too, is struggling to make the transformation from a rapidly growing emerging market to a world superpower, a problem reflected in the relatively disappointing returns from Asia during the quarter. On the other hand, the US economy continues to gain momentum. Whilst the pace of growth is subdued by historic standards, it is growth nonetheless and much of the stock market's recent strength has been based on the assumption that US growth will eventually lead to a global recovery. Certainly, despite the problems in Cyprus, the Eurozone crisis feels very much like yesterday's story even if the core problems still remain.   Marriott Int Real Estate comment - Sep 12 Wednesday, 14 November 2012 Fund Manager Comment Global Real Estate followed the broader market higher during the third quarter of 2012, albeit at a slightly subdued pace. Whilst valuations of prime commercial property assets have been firm, occupancy levels remain vulnerable to contraction, most notably in the retail sub sector which continues to struggle with flat sales figures and store closures. Of course, prime commercial property sites are so called because of their location and the majority of businesses in our real estate portfolio own tracts of land and buildings in some of the best sites in the world which, if not entirely immune to economic slowdown, are at least shielded from the worst of any impact. The largest component of the portfolio is located in the US and Canada which, we continue to believe, offer the best prospect for recovery from the fallout of the 2008 banking crisis. With the US housing market showing tentative signs of recovery and unemployment levels stabilising, prospects for growth in certain regions remain reasonable. In the UK, the focus remains very much on the central London market which is effectively in a housing bubble although demand from wealthy immigrants shows little sign of easing. This effect has a natural impact across all sub sectors of the central London market where nearly all of our UK holdings have good exposure. Europe, on the other hand, remains depressed although valuations are low. We do not expect an early turnaround in this area, however, which remains a relatively underweight part of the Fund portfolio. Not all parts of the portfolio operate in such difficult and often stagnant markets. Our only Asian equity, The Link REIT in Hong Kong, which is the largest quoted REIT in Asia, continues to benefit from a strong trading performance from its portfolio of shopping malls and car parks. Land in Hong Kong, where The Link carries out most of its business, is underpinned by scarcity value making this an ideal investment and one which the Fund has held for several years. As an investment, in addition to the rising value of the company's land and assets, The Link has always pursued an active dividend policy and avoided the dividend cuts incurred by other parts of the industry in the wake of the banking crisis. The current yield of 3.5% is paid gross to investors and distributions have grown since the first dividend was paid in August 2006.   Marriott Int Real Estate comment - Jun 12 Wednesday, 15 August 2012 Fund Manager Comment International Real Estate has held up remarkably well in 2012 to date. The Fund returned 11% over the first half of the year which was an improvement on the returns from global equities (+6%) and global bonds (+0.4%) which have struggled to make much headway against a backdrop of difficult market conditions. The company visits we have made over the course of the last quarter have highlighted why this level of outperformance has occurred and why it is likely to continue in the near future if, as we expect, markets remain choppy pending a resolution to the Eurozone crisis. Firstly, most of the securities in the underlying Fund portfolio have a strong tenant base. This is absolutely critical to the success or otherwise of a commercial property portfolio as it enables landlords to look through short term weaknesses in the market place and to build up cash balances either for acquisitions, refurbishments or return of cash to shareholders by way of dividends. Secondly, and not unrelated to the first point, property portfolios need to be centrally located in areas of above average growth. In the UK this currently means London although a number of our property companies have sites out of London where returns have been robust, if not spectacular. This leads to the third criteria that management teams must be able to add value in falling as well as rising markets. Whilst age and experience is often considered to be a barrier to entry in more hi-tech markets, in property it is almost a prerequisite for success. That is not to say that younger management teams cannot do as well as their more experienced colleagues. It is just that successful property investing is a longer term, cyclical business and we are generally reassured by the longevity and track records of the management teams running the businesses in which we invest.   Marriott Int Real Estate comment - Mar 12 Monday, 21 May 2012 Fund Manager Comment It has been a good start to 2012 with the Fund up by nearly 11% in Dollar terms in the first quarter. To a greater extent, this move reflected the ongoing recovery in the US commercial property market where the fund has a near 50% exposure. Much of the stock-market gains in the quarter were driven by a recovery in financial and technology stocks, many of which carried on their ascendancy from the depths reached in the third quarter of 2011. Nonetheless, the pattern of recovery in the major commercial property sector is well underway and the fund price has now doubled over the last three years. Improving economic conditions translate into improved profitability for the companies in the Fund portfolio, most of which have a high correlation with the wider economy. Better GDP growth means a more secure tenant base and provides scope for rental growth as well as a reduction in tenant failure, something which has hurt UK high street retailers in recent years. Despite the difficult conditions in this market, our holdings have proved to be generally resilient with the exception of those exposed to the UK industrial sub sector which has suffered as economic growth in the region has failed to gain meaningful traction. Elsewhere, however, the Canadian market, which represents our third largest regional exposure (after the UK) has fared well whilst our European holdings have been resilient despite the ongoing eurozone crisis. We do not expect to shift asset allocation significantly within the portfolio in the short term. The large weighting in North America has worked in our favour and the US is now some way ahead of other major economies in terms of recovery from the banking crisis, in part thanks to its relatively limited exposure to Europe (from an export/import perspective). We also remain diversified across a range of sub sectors and we expect the ongoing recovery to filter through to investors in the form of improved dividend payouts as the year progresses. The commercial property sector remains divided between the 'haves' and the 'have nots' with the best opportunities being found in the more significant players with financial muscle and deeper pockets. From our perspective, this means a focus on top end city centre properties rather than second tier businesses where conditions are far more difficult. Inevitably, it also means a focus on the leading Real Estate Investment Trusts where dividends are robustly covered by rental income streams and liquidity is ample.   Marriott Int Real Estate comment - Dec 11 Monday, 19 March 2012 Fund Manager Comment The global real estate sector had a tough 2011, falling by 8% in Dollar terms. The International Real Estate Fund fell by 3.8% over the course of the year, due in part, to its large exposure to the US Real Estate Investment Trust (REIT) sector, which was the only major global property market to record a meaningful total return over the year. Australia, where we also have an overweight position, performed reasonably well but the UK and especially Europe were both disappointing as their respective economies spent most of 2011 grappling with the fallout from the Euro zone crisis and fears of a double dip recession. Within the portfolio, shopping malls performed well. Apartment companies also performed well as the shift from home ownership gathered momentum but it was another poor year for the hotel sector. This helped our relative performance as we typically avoid this part of the market. Elsewhere, the office sector performed indifferently thanks to weakening employment trends whilst industrials too lagged the market thanks to their correlation with the wider economy. Interestingly, emerging market property, where we have a very low weighting, performed badly as risk aversion prevailed, liquidity dried up and economic growth sagged. We do not expect to alter our asset allocation significantly in the first half of 2012. Growth in the US is forecast to be the highest in major markets, at least in the first half of 2012, and the US has relatively low exposure to Europe. We may reduce our holdings in this region as, Germany aside, it will be some time before the Euro zone crisis abates although yields are attractive and dividend payouts are secure thanks to the widespread financial restructuring which took place in the wake of the 2008 credit crisis. Central London prices are holding up well, but outside this area the UK is suffering from anemic economic growth and high unemployment, neither of which is likely to improve in the near term. However, from a yield perspective, the UK market is attractive and withholding taxes are generally lower than in other parts of the world.   Marriott Int Real Estate comment - Sep 11 Thursday, 22 December 2011 Fund Manager Comment The quoted property sector held up relatively well against the wider financial sector in the third quarter of 2011 although this was cold comfort for investors who still watched their investments fall by 15% in Dollar terms versus a fall in the wider market of 17.3%. We have referred to the decoupling of the property sector from the wider financial sector in the past and this trend remains very much intact. To a greater extent, this reflects the poor attributes of the banking sector but it also highlights the fact that the property sector is underpinned by strong fundamentals and, in the case of our own holdings, because of balance sheet strength and quality of the underlying tenancy base. Consensus earnings for the listed property sector are now forecast to slow by around 1% in 2012. Our work on dividend projections for the same period suggests either flat or slightly rising rates across most sub sectors. The downturn in the property market, though, reflects wider concerns over the economy and fears of a sharper deterioration in earnings than are currently being reported by property companies operating on the front line. The sector, however, is not immune from this sort of global downdraft despite the apparent lack of correlation between, for example, government occupied office space in Washington DC and the threat of a Greek default. One area where we do have a more direct exposure to the global downturn is in the industrial sub sector where companies such as Prologis and Segro have been marked down in anticipation of a slowdown in their respective markets. At 6% in total, this is a relatively small component of the fund but more sensitive to the current crisis than the more domestic companies elsewhere in the portfolio. We believe that, from a price perspective, the property sector will stage a recovery assuming that North America and the UK, in particular, manage to avoid recession and that the Eurozone produces a credible package to salvage the debt crisis. However, the breadth of the recent sell off has left very few areas unscathed and, despite the nature of the underlying holdings, property companies are not immune from a general flight to risk free assets such as treasury bonds and cash. At this point in the cycle, we are looking to add to some of our existing holdings in the fund to lock in dividend yields and prepare ourselves for the eventual upturn. Admittedly, this may be some time away but when it arrives, the best value will already have gone and the discount price gap to net asset value will have closed. Investors in the fund should be looking to do the same thing; adding to holdings at these lower levels and allowing the underlying equities time to recover whilst benefiting from the reliable income stream.   Marriott Int Real Estate comment - Jun 11 Thursday, 8 September 2011 Fund Manager Comment Unlike the beleaguered banks, the property companies in our universe have little or no exposure to the Greek crisis and the property sector has decoupled from the broader financial sector as a result. Property sometimes has a patchy record in times of high inflation which is usually accompanied by high interest rates and economic malaise. Unusually, with interest rates so low, the better commercial property companies are neither struggling to raise capital nor worried about escalating levels of debt. It is, however, a sector of 'haves' and 'have nots'. The 'haves' include leading names in the commercial space with high occupancy levels and a great tenant mix across all sub sectors of the market. These companies typically own prime real estate in desirable locations, depending on their exact business. Industrial winners like Prologis own the best warehouses close to airports and other transport hubs; leading retail REITs like British Land or Riocan own the best shopping centres; downtown office owners like Washington REIT own prime real estate in key city centres and so on. These and others like them are the sort of names we own in the International Real Estate Fund. On the other hand, the residential market in the US in particular remains in disarray. New mortgage approvals are at historic lows and most urban markets are overloaded with empty properties for sale, a legacy of the 2008/9 credit crunch. In the UK and swathes of Europe too, the commercial property market outside of major hubs and cities is still weak. The Fund, however, owns as many of the best real estate investment trusts in the UK, US and Europe that we are able to find. Yields remains good (gross dividend yields are typically over 4%) and the strong are getting stronger as second or third tier businesses struggle in an environment of lacklustre growth and high unemployment. In time, the strength of the urban sector will spread to the rest of the region but not for 2 or 3 years, in our view. However, despite the good performance of the REIT sector over the last 12 months, valuations remain significantly below their pre credit crisis levels and we believe that the next 5 years will prove to be particularly rewarding for the Fund's investors on a total return basis as economic growth slowly gathers momentum and investors revisit a relatively neglected asset class.   Marriott Int Real Estate comment - Mar 11 Wednesday, 25 May 2011 Fund Manager Comment Commercial real estate has been a good performer in 2011 to date with the distribution units in Marriott International Real Estate Fund up by nearly 6% after adjusting for the recent dividend payout. In part, this is thanks to the first world nature of the underlying investments. Since the start of the year, developed economies have out-performed emerging markets, an area where the Fund has little direct exposure. Unlike the troubled residential sector, commercial property is proving to be a good investment both for income seekers and for investors wishing to put money into an inflation hedge other than gold which has the disadvantage of paying no dividend and proving impossible to value from a fundamental perspective. Commercial property occupancy levels on both sides of the Atlantic are very good and, as we have commented before, balance sheets are exceptionally strong, resulting in excellent dividend streams. Liquidity in the fund remains. The holdings in our fund are blue chip in nature; tenancy bases are of the highest quality and defaults, whilst not unheard of, are rare. We have also seen some corporate activity during the quarter with the recently announced $14.2bn merger of two of our US REIT holdings AMB and Prologis helping to support an already buoyant sector. With general equity markets remaining volatile, government bonds and cash yields at low levels and the political risk of emerging market investing rising daily, we believe that the commercial property sector is a relatively low risk area in which to be exposed in 2011, something which we expect stock prices to reflect as the year progresses.   Marriott Int Real Estate comment - Dec 10 Thursday, 24 February 2011 Fund Manager Comment Real estate owning equities have continued to outperform the broader equity market into the final quarter of 2010. It has, however, paid to be selective. Whilst major city centre properties have recovered remarkably quickly from the credit crisis of 2008/9, non core markets in suburban areas continue to generally struggle, as do developers. Here, vacancy rates often remain high across all sectors, but especially retail where smaller players are still struggling to make headway against a backdrop of high unemployment and lacklustre growth. As we have noted before, the strongest players have already raised cash to provide a buffer against any further market weakness and a fighting fund to acquire distressed assets at low prices. These companies form the core of our portfolio and with dividend growth on the ascendancy, the real estate investment trust sector is rapidly returning to a period of steady inflation proofed growth with excellent dividend yields, particularly when compared to returns from bonds and cash. The latest round of Quantitative Easing will also help the sector. We do not expect interest rates to start moving higher at least until 2012 by which time credit markets should have eased further. Our principal worry is that the weakness of the Dollar will begin to sap returns in global terms but currency predictions are fraught with uncertainty and so our best course of action is to remain currency neutral, allowing us to concentrate on holding assets of the highest quality in those centres where we expect growth to continue to accelerate throughout 2010 and into 2011.   Sector Changed Tuesday, 28 December 2010 Official Announcement The fund changed sectors from Global--Equity--Varied Specialist to Global--Real Estate--General on 28 Dec 2010   Marriott Int Real Estate comment - Jun 10 Wednesday, 8 September 2010 Fund Manager Comment After rallying strongly in 2009 and the first quarter of 2010, the real estate sector has tracked the financial sector downwards amid concerns over the possible break up of the Euro zone and the ongoing debt crisis surrounding Greece and the peripheral Euro zone economies. On the street, vacancy levels appear to be stabilising, dividend suspensions are ending and corporate activity, supported by capital raising exercises, is on the increase. Whilst the Fund holds shares in companies owning some of the finest city centre real estate in the world, future growth depends on economic recovery. The emphasis on the US and Canada within the fund supports our view that North America will lead any global recovery helped by demand from developing markets. The key to growth in the real estate sector lies with the availability of credit, something which is gradually improving after the near collapse of the mortgage market in 2008. It also depends upon the creation of jobs and there is, as yet, no clear evidence that the economic recovery is translating into lower jobless figures. There is, however, evidence to suggest that private equity activity is increasing, particularly in prime city centre properties but the market remains patchy and we expect it to be several months before we can confidently predict a wider and more sustainable recovery.   Marriott Int Real Estate comment - Mar 10 Thursday, 24 June 2010 Fund Manager Comment Returns from the quoted real estate sector have settled down to a more consistent trading pattern since the start of the year. Most companies which cut dividends in 2009 in response to the credit crisis have now resumed payouts and the flurry of capital raising activity appears to be coming to an end. Although over half of the Fund is invested into North American REITs, Dollar strength has somewhat diluted performance over the course of the year to date. Property companies tend on the whole to be quite domestically focussed and we are always mindful of the need to be invested in strong economies as well as the top property companies within the sector. Our exposure to Canada and Australia for example, whose currencies have been strong of late, has had a positive impact upon performance. As at the start of March, the Fund was fully invested.   Marriott Int Real Estate comment - Dec 09 Tuesday, 23 March 2010 Fund Manager Comment The real estate sector enters 2010 at an interesting junction in its recent history. After performing poorly in 2007 and 2008 as the credit crisis unfolded, real estate bounced back spectacularly in 2009 on the back of improving credit markets and a generally better economic backdrop. Access to capital markets is essential for many real estate companies and the best of these businesses have been able to improve their balance sheets in 2009 providing ample capital for growth moving forward. Ironically, although share prices are still significantly below the highest levels reached in early 2007, many such companies are in far better shape now than they were then. Dividends have been largely restored, tenant defaults are falling and the strongest survivors are actively seeking out distressed sellers in the market. The focus on quality and liquidity within the Marriott International Real Estate Fund means that Marriott is able to invest in many of these leading businesses and expect a number of them to initiate modest dividend rises in 2010 as economic conditions continue to improve.   Marriott Int Real Estate comment - Sep 09 Wednesday, 9 December 2009 Fund Manager Comment Real Estate tracked the market lower in October thanks to a combination of profit taking and general nervousness over the direction of the market after such stellar performance since March. Results from US REITs have, however, been marginally better than expectations and this has provided some support to share prices albeit not enough to prevent indices and this fund from slipping into the red during October. Moving forward, we expect markets to remain range bound until more evidence can be provided that vacancy rates and rents are levelling out. Most capital restructuring has already taken place either through debt or rights issues and we do not anticipate further dividend cuts of the kind which decimated the sector this time last year. Yields remain very good and the gross yield generated by the fund is over double the yield available from the benchmark 10 year US Treasury bond.   Marriott Int Real Estate comment - Dec 08 Monday, 30 March 2009 Fund Manager Comment Portfolio restructuring completed by end of February 2008: · Wider geographical diversity. · Increase gross yield - targeting in excess of 5%. · US exposure reduced from around 55% to approximately 33%. Weighting in Far East, Europe and UK all correspondingly increased to 17%, 22% and 15% respectively. Transactions designed to enhance fund income: · Avoid selling cum dividend. · Reduction of lower yielding positions. · Maintain diversification. · Focus remains on investors with solid dividends rather than developers. Real Estate sector has come under pressure as economic concerns increase and o financial crisis intensifies. Recent sell-off has produced higher yielding opportunities in all markets. Valuations look more attractive albeit caution is still warranted. Yield Comparison at 31 December 2008: · MIREF 10.39% · JPM Global Gov Bond 2.43%   Marriott Int Real Estate comment - Jun 08 Monday, 1 September 2008 Fund Manager Comment Portfolio restructuring completed by end of February 2008: · Wider geographical diversity · Increase gross yield - targeting in excess of 5% US exposure reduced from around 55% to approximately 32%. Weighting in Far East, Europe and UK all correspondingly increased - to 17%, 24% and 14% respectively Transactions designed to enhance fund income · Avoid selling cum dividend · Reduction of lower yielding positions · Maintain diversification Real Estate sector has come under pressure as economic concerns increase Recent sell-off has produced higher yielding opportunities in all markets Focus remains on investors with solid dividends rather than developers Yield Comparison at 30 June 2008: · MIREF 6.52% · JPM Global Gov Bond 3.67%   Marriott Int Real Estate comment - Mar 08 Thursday, 22 May 2008 Fund Manager Comment Portfolio restructuring commenced at end of November and completed by end of February · Seek to reduce US Exposure · Wider geographical diversity · Increase gross yield - targeting in excess of 5% · Focus remains on Investors with solid dividends rather than developers US exposure reduced from around 55% to approximately 30%. Weighting in Far East, Europe and UK all correspondingly increased - to 17%, 26% and 16% respectively Recent sell-off has produced higher yielding opportunities in all markets Transactions designed to enhance fund income · Avoid selling cum dividend · Reduction of lower yielding positions · Maintain diversification Yield Comparison at 31 March 2008: · MIREF 5.21% · JPM Global Gov Bond 3.15%   Marriott Int Real Estate comment - Dec 07 Tuesday, 1 April 2008 Fund Manager Comment Portfolio restructuring commenced at end of November. . Seek to reduce US Exposure . Wider geographical diversity . Increase gross yield - targeting in excess of 5% . Focus remains on investors with solid dividends rather than developers US exposure reduced from approximately 55% to under 45%. Weighting in Asia, Europe and UK all correspondingly increased. Asset Allocation favours higher yielding markets Transactions timed to reduce impact on fund income Avoid selling cum dividend Maintain diversification   Marriott Int Real Estate comment - Sep 06 Tuesday, 14 November 2006 Fund Manager Comment 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. Click here for original article   Marriott Int Real Estate comment - Mar 06 Friday, 12 May 2006 Fund Manager Comment Distribution At the end of March, the fund paid a semi-annual distribution of 2.92 US cents per unit, representing growth of 54% over the corresponding 6-month period last year. The growth was achieved mainly as a result of special dividends paid by securities in the fund and was therefore significantly higher than what had been anticipated. Over and above the special dividends, there was 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. 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), although the initial forward yield, at just 4.3%, remains historically low. 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. Capital Having appreciated by 5% in 2005, the fund has gained nearly 10% 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 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 fund is expected to deliver total returns of between 2% and 6% per annum, although short-term volatility may be experienced.   Marriott Int Real Estate comment - Dec 05 Monday, 13 March 2006 Fund Manager Comment Distribution At the end of September 2005, the fund paid a semi-annual distribution of 2.65 cents per share, representing growth over the comparable period last year of 10.4%. This 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 accelerated from the second half of 2003. Future Income The fund is currently yielding 4.7% (gross), which compares favourably with the 3.2% yield of the JP Morgan Global Government Bond Index. Given continued evidence of a pick-up in global economic activity, particularly in the United States, the fund is expected to produce income growth of between 4% and 6% per annum over the next 3 to 5 years. Occupancy levels are improving across all major property types, which should translate into market rental growth over the next 12 months, although office rental growth is likely to lag the rest of the market by up to a year. Capital After strong gains in US Dollars in 2003 and the first half of 2004, and a significant amount of capital volatility since then, the underlying securities in the fund have moved back to large premiums to net asset value (in excess of 20% in some instances). We continue to caution investors that the underlying securities in the fund are trading at large premiums to net asset value and the inverse relationship between interest rates and property prices/values (i.e. 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. ** GIVEN THE FACT THAT THE SECURITIES IN THE FUND ARE TRADING AT SUCH LARGE PREMIUMS TO NET ASSET VALUE, WE WOULD STRONGLY RECOMMEND THAT INVESTORS CONSIDER SWITCHING OUT OF THE MARRIOTT INTERNATIONAL REAL ESTATE FUND AND INTO THE MARRIOTT INTERNATIONAL INCOME GROWTH FUND AT NO COST *** Based on the current income yield of 4.7% (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 4% and 7% per annum, although short-term capital volatility may be experienced.   Marriott Int Real Estate comment - Sep 05 Monday, 21 November 2005 Fund Manager Comment Distribution At the end of September 2005, the fund paid a semi-annual distribution of 2.65 cents per share, representing growth over the comparable period last year of 10.4%. This 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 accelerated from the second half of 2003. Future Income The fund is currently yielding 4.5% (gross), which compares favourably with the 3.0% yield of the JP Morgan Global Government Bond Index. Given continued evidence of a pick-up in global economic activity, particularly in the United States, the fund is expected to produce income growth of between 4% and 6% per annum over the next 3 to 5 years. Occupancy levels are improving across all major property types, which should translate into market rental growth over the next 12 months, although office rental growth is likely to lag the rest of the market by up to a year. Capital After strong gains in US dollars in 2003 and the first half of 2004, and a significant amount of capital volatility since then, the underlying securities in the fund have moved back to large premiums to net asset value (in excess of 20% in some instances). We continue to caution investors that the underlying securities in the fund are trading at large premiums to net asset value and 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 nflation by raising interest rates. Given the fact that the securities in the fund are trading at such large premiums to net asset value, we would strongly recommend that investors consider switching out of the Marriott International Real Estate Fund and into the Marriott International Income Growth Fund at no cost Based on the current income yield of 4.5% (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 2% and 6% per annum, although short-term capital volatility may be experienced.   Marriott Int Real Estate comment - Jun 05 Monday, 15 August 2005 Fund Manager Comment Distribution At the end of March 2005, the fund paid a semi-annual distribution of 1.9 cents per share, representing growth over the comparable period last year of 5.6% (in line with expectations). This 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 accelerated from the second half of 2003. Future Income The fund is currently yielding 4.5% (gross), which compares favourably with the 2.8% yield of the JP Morgan Global Government Bond Index. Given continued evidence of a pick-up in global economic activity, particularly in the United States, the fund is expected to produce income growth of between 4% and 6% per annum over the next 3 to 5 years. Occupancy levels are improving across all major property types, which should translate into market rental growth over the next 12 months, although office rental growth is likely to lag the rest of the market by up to a year. Capital After strong gains in US Dollars in 2003 and the first half of 2004, and a significant amount of capital volatility since then, the underlying securities in the fund have moved back to large premiums to net asset value (in excess of 20% in some instances). We continue to caution investors that the underlying securities in the fund are trading at large premiums to net asset value and 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. GIVEN THE FACT THAT THE SECURITIES IN THE FUND ARE TRADING AT SUCH LARGE PREMIUMS TO NET ASSET VALUE, WE WOULD STRONGLY RECOMMEND THAT INVESTORS CONSIDER SWITCHING OUT OF THE MARRIOTT INTERNATIONAL REAL ESTATE FUND AND INTO THE MARRIOTT INTERNATIONAL INCOME GROWTH FUND AT NO COST Based on the current income yield of 4.5% (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 2% and 6% per annum, although short-term capital volatility may be experienced.   Marriott Int Real Estate comment - Mar 05 Thursday, 19 May 2005 Fund Manager Comment Distribution At the end of March 2005, the fund paid a semi-annual distribution of 1.9 cents per share, representing growth over the comparable period last year of 5.6% (in line with expectations). This 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 accelerated from the second half of 2003. Future Income The fund is currently yielding 5.1% (gross), which compares favourably with the 3.2% yield of the JP Morgan Global Government Bond Index. Given continued evidence of a pick-up in global economic activity, particularly in the United States, the fund is expected to produce income growth of between 4% and 6% per annum over the next 3 to 5 years. Occupancy levels are improving across all major property types, which should translate into market rental growth over the next 12 months, although office rental growth is likely to lag the rest of the market by up to a year. Capital After strong capital gains in 2003 and the first half of 2004, the fund has now experienced 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 (i.e. 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, although short-term capital volatility may be experienced.   Marriott Int Real Estate comment - Dec 04 Wednesday, 16 February 2005 Fund Manager Comment Distribution At the end of September 2004, the fund paid a semi-annual distribution of 2.4 cents per share. For the year as a whole, the fund distributed 4.2 cents representing growth of 7.5% over the previous years distribution. This 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 accelerated from the second half of 2003. Future Income The fund is currently yielding 4.4% (gross), which although comparing favourably with the 3.2% yield of the JP Morgan Global Government Bond Index, represents the lowest yields on listed real estate securities in more than 30 years (the average yield over the past 30 years has been approximately 7.5%). Given evidence of a pick-up in economic activity, particularly in the United States, the fund is expected to produce income growth of between 3% and 5% per annum over the next 3 to 5 years. Occupancy levels are improving across all major property types, which should translate into market rental growth over the next 12 and 24 months, although office rental growth is likely to lag the rest of the market by up to 2 years. Capital The fund has experienced short-term capital volatility over the past 2 years. During 2003 and the first quarter of 2004, the 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.   Marriott Int Real Estate comment - Sep 04 Wednesday, 20 October 2004 Fund Manager Comment Distribution At the end of September 2004, the fund paid a semi-annual distribution of 2.4 cents per share. For the year as a whole, the fund distributed 4.2 cents representing growth of 7.5% over the previous years distribution. This 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 accelerated from the second half of 2003. Future Income The fund is currently yielding 5.0% (gross), which compares favourably with the 3.3% yield of the JP Morgan Global Government Bond Index. Given evidence of a pick-up in economic activity, particularly in the United States, the fund is expected to produce income growth of between 3% and 5% per annum over the next 3 to 5 years. The growing number of build-to-suit projects (ie, built specifically for a single tenant based on the tenants unique requirements) started in the past 6 months suggest the demand for space is gathering momentum and should translate into rental growth. At the same time there has been very little speculative development over the past 2 years, which has resulted in limited supply while property fundamentals were weak. Capital The fund has experienced short term capital volatility over the past 18 months. During 2003 and the first quarter of 2004, the fund appreciated by more than 30%. 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 the fund manager's cautioned investors that short term capital declines may be experienced. 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 once again appreciated significantly. The fund manager's would once again caution investors that the underlying securities in the fund are trading at premiums in excess of 10% to net asset value. This may result in further short-term capital volatility. Based on the current income yield of 5.0% (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, the fund manager's are forecasting total returns of between 4% and 8% per annum.   Marriott Int Real Estate comment - Jun 04 Tuesday, 31 August 2004 Fund Manager Comment Distribution At the end of March 2004, the fund paid a semi-annual distribution of 1.8 cents per share, representing a 10% decline from the previous dividend. This does not represent a decline in distribution from the underlying securities in the fund, but rather a timing difference due to the fact that the funds exposure to European real estate companies (which tend to only pay one dividend a year) has been increased while the funds exposure to US real estate companies (which pay quarterly dividends) has been reduced. Investors can therefore anticipate a distribution of at least 2.2 cents per share in September this year, bringing the total distribution for the year to 4.0 cents per share, representing growth of approximately 3.5% over the total distribution for 2003. Future Income The fund is currently yielding 5.3% (gross), which compares favourably with the 3.6% yield of the JP Morgan Global Government Bond Index. Given evidence of a pick-up in economic activity, particularly in the United States, the fund is expected to produce income growth of between 3% and 5% per annum over the next 3 to 5 years. The growing number of build-to-suit projects (ie, built specifically for a single tenant based on the tenants unique requirements) started in the past 6 months suggest the demand for space is gathering momentum and should translate into rental growth. At the same time there has been very little speculative development over the past two years, which has resulted in limited supply while property fundamentals were weak. Capital The fund has experienced short term capital volatility over the past 18 months. During 2003 and the first quarter of 2004, the fund appreciated by more than 30%. 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 the fund manager's cautioned investors that short term capital declines may be experienced. 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. In June, the fund recovered a large portion of the capital decline incurred in the preceding 2 months and the fund manager's would once again caution investors that the underlying securities in the fund are trading at premiums of between 5% and 10% to net asset value. This may result in further short-term capital volatility. Based on the current income yield of 5.3% (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, the fund manager's are forecasting total returns of between 6% and 9% per annum.   Marriott Int Real Estate comment - Mar 04 Friday, 21 May 2004 Fund Manager Comment Distribution At the end of March 2004, the fund paid away a semi-annual distribution of 1.8 cents per share, representing a 10% decline over the previous dividend. This does not represent a decline in distribution from the underlying securities in the fund, but rather a timing difference due to the fact that the funds exposure to European real estate companies (which tend to only pay one dividend a year) has been increased while the funds exposure to US real estate companies (which pay quarterly dividends) has been reduced. Investors can therefore anticipate a distribution of at least 2.2 cents per share in September this year, bringing the total distribution for the year to 4.0 cents per share, representing growth of approximately 3.5% over last years distribution. Future Income The fund is currently yielding 5.1% (gross), which compares favourably with the 3.1% yield of the JP Morgan Global Government Bond Index. Given early evidence of a pick-up in economic activity, particularly in the United States, the fund is expected to produce income growth of between 3% and 5% per annum over the next 3 to 5 years. The growing number of build-to-suit projects (i.e. built specifically for a single tenant based on the tenants unique requirements) started in the past 6 months suggest the demand for space is gathering momentum and should translate into rental growth. At the same time there has been very little speculative development over the past 2 years, which has resulted in limited supply coming on stream while property fundamentals were weak. Capital The fund has delivered strong capital growth in US dollars in excess of 20% during the course of 2003. Currently, the listed real estate companies in the fund are trading at premiums to the value of their underlying property portfolios. While premiums to net asset value are regular features of the listed real estate market during times of global economic recovery, the current premiums to net asset value, at between 10% and 15%, are higher than normal. These valuations suggest that the listed real estate securities in our universe will deliver income growth in the order of 5% per annum over the next 5 years, a level that is at the very top end of our forecast range. An investor must be aware that capital volatility should be expected and short term capital losses may be experienced. Based on the current income yield of 5.5% (pre-tax), an expected yield in 5 years time of between 5.8% and 6.2% and income growth in US dollars of between 3% and 5% per annum, the fund is forecast to deliver total returns of between 6% and 10% (pre-tax) per annum in US dollars.   Marriott Int Real Estate comment - Dec 03 Thursday, 26 February 2004 Fund Manager Comment Distribution At the end of September 2003, the fund paid away a semi-annual distribution amounted to 2.0cps, bringing the total distribution for 2003 to 3.9cps, representing growth of 18% over 2002 (although 2002's distribution included the negative impact of September 11th on the fund's income between October 2001 and February 2002). Future Income The fund is currently yielding 5.5% (gross), which compares favorably with the 3.3% yield of the JP Morgan Global Government Bond index. Given early evidence of a pick-up in economic activity, particularly in the United States, the fund is expected to produce income growth of between 3% and 5% per annum over the next 3 to 5 years. The growing number of build-to-suit projects (ie, built specifically for a single tenant based on the tenants unique requirements) started in the past six months suggest the demand for space is gathering momentum and should translate into rental growth. At the same time there has been very little speculative development over the past two years, which has resulted in limited supply coming on stream while property fundamentals were weak. Capital The fund has delivered strong capital growth in US dollars in excess of 20% during the course of 2003. Currently, the listed real estate companies in the fund are trading at premiums to the value of their underlying property portfolios. While premiums to net asset value are regular features of the listed real estate market during times of global economic recovery, the current premiums to net asset value, at between 10% and 15%, are higher than normal. These valuations suggest that the listed real estate securities in our universe will deliver income growth in the order of 5% per annum over the next 5 years, a level that is at the very top end of our forecast range. Based on the current income yield of 5.5% (pre-tax), an expected yield in five years time of between 5.8% and 6.2% and income growth in US dollars of between 3% and 5% per annum, the fund is forecast to deliver total returns of between 6% and 10% (pre-tax) per annum in US dollars.   Marriott Int Real Estate comment - Sep 03 Thursday, 13 November 2003 Fund Manager Comment As at the end of August 2003, the fund was yielding 5.8% gross. This compared favourably with the 3.3% yield generated by the JP Morgan Global Government Bond index. At the end of September, the fund paid away a semi-annual dividend equivalent to 2.0 cents per share, bringing the distribution for the past 12 months to 3.9 cents. The last two years have been a difficult time for equity investors and have provided a good test of the fund's ability to produce absolute returns regardless of the movements of the wider market. The focus on income and quality has provided support during a time when accounting scandals, earnings disappointments and rising geopolitical risk have continued to undermine markets throughout the world but particularly in North America. The prospect of improved income growth in a growing world economy has pushed the value of listed property securities above the value of their underlying property portfolios. Investors are clealrly looking at real estate securities as a yield play (as opposed to bonds) with the prospect of above-inflation income growth.   Marriott Int Real Estate comment - Jun 03 Thursday, 31 July 2003 Fund Manager Comment As at the end of June 2003, the fund was yielding 6.3% gross. This compared favourably with the 3.00% yield generated by the JP Morgan Global Government Bond index. At the end of March, the fund paid away a semi-annual dividend equivalent to 1.9 cents per share, bringing the distribution for the past 12 months to 3.8 cents. The last two years have been a difficult time for equity investors and have provided a good test of the fund's ability to produce absolute returns regardless of the movements of the wider market. The focus on income and quality has provided support during a time when accounting scandals, earnings disappointments and rising geopolitical risk have continued to undermine markets throughout the world but particularly in North America. The fund is not immune from the global economic downturn, but the longer-term nature of property as an investment coupled with a steady income stream should provide support during the uncertainties of the year ahead.   Marriott Int Real Estate comment - Mar 03 Thursday, 22 May 2003 Fund Manager Comment As at the end of March 2003, the fund was yielding 6.8% gross. This compared favourably with the 3.2% yield generated by the JP Morgan Global Government Bond index. At the end of March, the fund paid away a semi-annual dividend equivalent to 1.9 cents per share, bringing the distribution for the past 12 months to 3.8 cents. The last 18 months have been a difficult time for equity investors and have provided a good test of the fund's ability to produce absolute returns regardless of the movements of the wider market. The focus on income and quality has provided support during a time when accounting scandals, earnings disappointments and rising geopolitical risk have continued to undermine markets throughout the world but particularly in North America. The fund is not immune from the global economic downturn, but the longer-term nature of property as an investment coupled with a steady income stream should provide support during the uncertainties of the year ahead.   Marriott Int Real Estate comment - Jan 03 Tuesday, 25 February 2003 Fund Manager Comment As at the end of January 2003, the Marriott Int Real Estate Fund was yielding 6.9% gross. This compared favourably with the 3.2% yield generated by the JP Morgan Global Government Bond index. At the end of September, the fund paid away a semi-annual dividend equivalent to 1.9 cents per share bringing the distribution for 2002 to 3.3 cents. The last 12 months have been a difficult time for equity investors and have provided a good test of the fund's ability to produce absolute returns regardless of the movements of the wider market. The focus on income and quality has provided support during a year when accounting scandals and earnings disappointments have continued to undermine markets throughout the world but particularly in North America. The fund is not immune from the global economic downturn, but the longer-term nature of property as an investment coupled with a steady income stream should provide support during the uncertainties of the year ahead.   Marriott Int Real Estate comment - Dec 02 Monday, 27 January 2003 Fund Manager Comment The Marriott International Real Estate Fund rose by 1.5% in December, bringing the total return for the whole of 2002 to 10% in US dollars. As at the end of December 2002, the fund was yielding 6.4% gross. This compared favourably with the 3.2% yield generated by the JP Morgan Global Government Bond Index. At the end of September, the fund paid away a semi-annual dividend equivalent to 1.9 cents per share bringing the distribution for 2002 to 3.3 cents. The last 12 months have been a difficult time for equity investors and have provided a good test of the fund's ability to produce absolute returns regardless of the movements of the wider market. The focus on income and quality has provided support during a year when accounting scandals and earnings disappointments have continued to undermine markets throughout the world but particularly in North America. The fund is not immune from the global economic downturn, but the longer-term nature of property as an investment coupled with a steady income stream should provide support during the uncertainties of the year ahead.   Marriott Int Real Estate comment - Nov 02 Wednesday, 18 December 2002 Fund Manager Comment As at the end of October 2002, the Marriott International Real Estate Fund was yielding 6.4% gross. This compared favourably with the 3.4% yield generated by the JP Morgan Global Government Bond index. At the end of September, the fund paid away a semi-annual dividend equivalent to 1.9 cents per share bringing the distribution for 2002 to date to 3.3 cents. The rally in major equity markets in October left most global property indices behind as investors rotated out of defensive stocks and into early cyclical sectors where valuations have remained subdued despite relatively benign economic data. This rally turned short-term comparative performances upside down, although year-to-date, the property sector remains well ahead of all major equity market indices which have a long way to go if they are to avoid a third successive year of declines. We are now well into the third quarter reporting season for North American Real Estate Investment Trusts which are crucial to the fund’s overall performance . As expected, office vacancies have been rising as employment opportunities have been contracting, however our earnings growth expectations for the fund as a whole remain unchanged at around 2% to 3% per annum over the next five years.   Marriott Int Real Estate comment - Oct 02 Monday, 18 November 2002 Fund Manager Comment After September's collapse, October has brought some welcome relief to stock markets with the MSCI gaining just over 5% in US dollar terms. Encouragingly, this has occurred despite a background of weak economic data suggesting that a level of support has been reached. Certainly valuations are not demanding in an historical context, but the key to further recovery will rest with the outlook for corporate earnings. In this respect, the latest quarter's results have been patchy, but on the whole have tended to be better than the market had feared. November 6th is the date of the next FOMC meeting and increasingly the universal view is that the Fed will cut US interest rates. Unemployment and ISM data due for release later today will probably determine the final decision. If the data is very weak, a 50 basis point cut cannot be ruled out, but overall 25 basis points looks more likely. This should be a positive for the market, particularly if the UK and Europe follow suit when their own central banks meet the next day.   Marriott Int Real Estate comment - Sep02 Monday, 11 November 2002 Fund Manager Comment At the end of September 2002, the Marriott International Real Estate Fund paid away a semi-annual dividend equivalent to 1.9 cents per share, an improvement of 35.7% from the 1.4 cents dividend paid away at the end of March 2002. The current US dollar yield on the fund is 6.4% (before taxes), which compares favourably with the 3.4% yield generated by the JP Morgan Global Government Bond index. The principal concern facing real estate companies is the financial health of their tenants on whom they depend to maintain their income streams. Of all of the sectors within the property market, the area of office accommodation is causing particular concern as many companies, weakened by recession and the excesses of the dot com bubble, default on their leasing obligations. Marriott intend, therefore, to continue the strategy of increasing exposure within the fund to the more resilient retail sector, which has served the fund well in 2002 to date. With property fundamentals having deteriorated since the third quarter of last year, Marriott are forecasting income growth in US dollars over the next three to five years of between 3% and 4% per annum, significantly lower than the 10% per annum average from international listed real estate securities over the last seven years. At the same time, Marriott expect the current discounts to net asset value at which the listed real estate securities are trading to reduce as property fundamentals improve in a low interest rate environment. This should translate into US dollar total returns (before taxes) in the region of 10% per annum, with the predictable income yield contributing more than two-thirds to this figure.   Marriott Int Real Estate comment - Aug 02 Friday, 20 September 2002 Fund Manager Comment The Marriott International Real Estate Fund rose by 0.45% in August 2002. The total return over 2002 to date currently stands at 9.45% compared with the return from the JP Morgan Global Government Bond index of 12.93%, all measured in US dollars. As at the end of August 2002, the Marriott International Real Estate Fund was yielding 5.9%. This compared favourably with the 3.5% yield currently generated by the JP Morgan Global Government Bond index. After the volatility in July, August saw a welcome return to form with steady gains across the property sector. By contrast, year-to-date, the S&P500 index has now fallen by 19.2% whilst the Morgan Stanley Capital International All-County Free index has fallen by 17.23%. Although the fund currently has a 70% commitment to the North American real estate market, the fund manager's have been gradually raising the fund's exposure to diversified European property companies, particularly those operating within a tax efficient corporate structure such as the Dutch BV. Suitable companies are, however, quite rare and the liquidity, diversity and yield characteristics of the North American property market means that REIT's are likely to constitute a substantial part of the Marriott International Real Estate Fund portfolio for the foreseeable future.   Marriott Int. Real Estate comment - Jul 02 Wednesday, 28 August 2002 Fund Manager Comment Over the course of a turbulent month for global equity markets, the Marriott International Real Estate Fund fell by 4.3% in July 2002. The total return over 2002 stands at 7.4%. These figures disguise the extraordinary level of volatility experienced by equity markets throughout July. The MSCI All-Country World Free index fell by 8.8% over the month to the 30th July, having at one stage fallen as low as 16.1%. For the first time this year, trauma in the broader equity market affected the Real Estate Investment Trust (REIT) sector in the US as investors took the (rare) opportunity to realise profits ahead of the second quarter of earnings results from the property sector. In the event, results from North American property REITs have so far been in line with expectations, although companies have been guiding earnings estimates lower for the third and fourth quarters of 2002. Inevitably, the fund manager's expect some weaker numbers later this year as the slowdown in the world economy starts to influence the property sector which traditionally lags the wider market by a full calendar quarter. The strength of bond markets over the quarter has meant that the yield from the benchmark JP Morgan Global Government Bond index has fallen from 3.9% to 3.7%. The gross yield from the Marriott International Real Estate Fund currently stands at 5.9% and the net yield (ie, after the deduction of withholding taxes) stands at 4.3%.   Marriott Int. Real Estate comment - Jun 02 Wednesday, 31 July 2002 Fund Manager Comment The Marriott International Real Estate Fund gained 1.1% in June 2002 in US dollar terms. Set against a background of falling global equity markets (the MSCI All Country World index fell by 7.5% over the same period), this performance was encouraging. Most of the gains within the fund arose from the holdings in the North American Real Estate Investment Trust sector ('REITs') which benefited from a further shift in sentiment away from so-called 'growth stocks' into sectors perceived to offer better value and, following the collapse of Worldcom, more transparent accounting policies. Performance of the International Real Estate Fund in June 2002 was also ahead of the Global Property Research 250 index which fell by 3.3% over the month. At 6%, the fund continues to yield 2% more in gross terms over the 3.9% yield generated by the JP Morgan Global Government Bond index and 0.4% more in net terms (ie after the deduction of withholding taxes). Since the beginning of the year, the fund has risen by 12%. The GPR 250 index rose by 9.2% whilst the MSCI All-Country World index has fallen by 10.2%. At a recent REIT conference in New York, the fund manager's met several management teams of companies in which the fund is invested. The fund manager's were impressed by their track-record, their commitment to shareholders and their prognosis for the long-term outlook of the real estate industry. At the start of the year, the fund manager's commented that they expected the North American REIT market (to which this fund has a 75% exposure) to return low double digit growth from a combination of income and capital gains throughout 2002. This projection is beginning to look conservative. Whilst the fund manager's do not expect growth in the sector to continue accelerating throughout the second half of 2002, the characteristics which have set the sector apart from the rest of the market still hold good today.   Marriott Int. Real Estate comment - May 02 Thursday, 13 June 2002 Fund Manager Comment The Marriott International Real Estate fund rose 4.2% during May 2002, at a time of poor sentiment towards broader stock market indices and continued uncertainty in Asia. This extends the period of outperformance by property so far this year, with the Morgan Stanley REIT (Real Estate Investment Trust) index up 9% in the year to date, outperforming the S&P500, down 5.1%, by 14% over the period. At the same time the technology biased NASDAQ Composite has fallen nearly 15% in the year to date. In terms of subsectors within the REITs universe, the fund managers' continue to be positive on the retail sectors - both regional malls and shopping centres - where the supply/demand picture is still well balanced compared to other areas, notwithstanding the problems affecting chains such as Kmart and the retrenchment at Gap. The office subsector, meanwhile, remains under pressure in specific parts of the US such as San Francisco, where owing to fallout in Silicon Valley vacancy rates are running at 30% to 40%, a rate not seen since the commercial property collapse of the late 1980s. In the United Kingdom, the property sector has been stimulated in the past month by a bout of corporate action, with an active investor applying pressure on British Land to buy back its own shares and introduce new managerial blood. While the company's existing management has not yet agreed to any of the proposals, the criticism has had a beneficial impact on the share price, with the discount to net asset value (traditionally much higher in the UK than in the US) narrowing from 45% six months ago to approximately 25%. Elsewhere, fund holding, the UK's biggest property company and a MIREF holding, has agreed to return STG500m to shareholders in a gesture that has been well received by investors.   Marriott Int. Real Estate comment - April 02 Friday, 24 May 2002 Fund Manager Comment The International Real Estate Fund gained exactly 1% in April 2002 from a combination of income and capital growth. The gross yield of the fund stood at 6% at the end of April 20020and the net yield stood at 4.3%. The gross yield remains nearly 2% higher than the notional yield currently generated by the JP Morgan Global Government Bond index. Since the beginning of the year, the fund has gained 6.1%. The Real Estate Investment Trust (REIT) market in North America, to which the fund currently has a 72% exposure, has outperformed the broader North American equity indices, such as the S&P500 index, substantially throughout 2002 to date. Although the market has retreated from its highs in recent days, the batch of first quarter earnings within the REIT sector and the fund in particular has been in line with or slightly better than expectations. The fund manager expects the REIT sector to make steady progress from these levels supported by a modest increase in dividend payouts. Both Europe and the United Kingdom have seen major rallies in their respective property sectors during 2002. Because of their generally lower dividend yields and less attractive tax treatment, the fund manager does not expect either region to outperform the broader market throughout the rest of 2002. Indeed, in the event of any further economic recovery in these regions, the property sector may well lag behind the rest of the market and the fund is currently neutral to underweight in these regions. In summary, The fund manager expects the fund to remain focussed on the North American REIT market because of its income attractions, transparency and liquidity. It is worth pointing out that the REIT market has returned over 13% on average each year since 1972 in US Dollar terms and has done so with 12% less volatility than the S&P500 index. In addition, the sector currently trades on approximately half of the price/earnings multiple of the S&P500 making it suitable for both income and value orientated investors. It is these two characteristics which the fund manager continue to aim to capture when managing the fund.   Marriott Int. Real Estate comment - March 02 Thursday, 16 May 2002 Fund Manager Comment The International Real Estate Fund gained 4.9% in March 2002 from a combination of income and capital growth. This was ahead of both the Global Property Research 250 index which gained 3.2% over the month, and the JP Morgan Global Government Bond index which fell by 0.5%. The gross yield of the fund rose to 6.4% in March 2002. This is now a full 2% higher than the notional yield currently generated by the JP Morgan Global Government Bond index and over 5% higher than the returns currently available from short-term US Dollar deposits. The strength of the fund in March 2002 reflected the performance of the North American real estate investment trust sector which gained sharply as investors continued to gravitate towards the attractive yields available relative to bonds. Such strong short-term performance is unusual for the real estate sector and we expect the market to pause for breath in the second quarter of the year, particularly if the broader stock market reacts to the recent encouraging flow of economic data. The North American real estate investment trust sector, to which the International Real Estate Fund currently has a 75% exposure, has risen by 8% in 2002 to date. Although consumer spending has been robust, results from companies within other sectors in the real estate industry have yet to fully reflect the difficult market conditions experienced in the final quarter of 2001. These factors will become evident as the forthcoming earnings season in April 2002 unfolds. The fund manager remains positive for the profitability of the North American real estate investment trust sector, although his belief is that the pace of growth seen in 2002 to date will prove difficult to sustain.   Marriott Int. Real Estate comment - Jan 02 Tuesday, 12 February 2002 Fund Manager Comment The immediate outlook for the property sector remains subdued with most of the returns for 2002 arising from income distributions rather than capital gains. The funds exposure to companies relying on office and apartment rental income has been reduced as these companies are suffering from a weak 2001. The Marriott International Real Estate Fund is yielding a full percentage point more than the comparative yield on the JP Morgan Global Government Bond Index and this is expected to increase as the fund reinvests back into the market.   Marriott International Real Estate - Oct 01 Wednesday, 28 November 2001 Fund Manager Comment The global property sector has recovered form the September 01 lows but is still underperforming broader equity markets. Some of the underperformance can be attributed to fundamentals.   Impact of attacks in US on Marriott funds Friday, 28 September 2001 Official Announcement Following the attacks on the USA the Marriott International Real Estate Fund has declined 11% in Dollars while the Rand has depreciated 3.4%. International real estate securities have been severely impacted by this disaster with hotel groups being most affected. The fund comprises of thirty four securities four of which have hotel exposure which declined between 20% and 25%. Other real estate securities were slightly weaker although largely unaffected. The World Trade Centre is privately owned and therefore the fund was not exposed.

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