diff --git a/new/build-system.jam b/new/build-system.jam
index 524dd2d67..1ba673929 100644
--- a/new/build-system.jam
+++ b/new/build-system.jam
@@ -6,6 +6,7 @@ import project ;
 import sequence ;
 import modules ;
 import feature ;
+import property-set ;
 import build-request ;
 import errors : error ;
 
@@ -109,8 +110,9 @@ if $(expanded)
     for local p in $(expanded)
     {
         for local t in $(targets) 
-        {            
-            $(t).direct-build-request [ feature.split $(p) ] ;
+        {   
+            $(t).direct-build-request 
+              [ property-set.create [ feature.split $(p) ] ] ;
         }        
     }
     
@@ -118,7 +120,8 @@ if $(expanded)
     {
         for local t in $(targets)
         {            
-            virtual-targets += [ $(t).generate [ feature.split $(p) ] ] ;
+            virtual-targets += [ $(t).generate 
+              [ property-set.create [ feature.split $(p) ] ] ] ;
         }        
     }
 }
@@ -126,7 +129,7 @@ else
 {
     for local t in $(targets)
     {        
-        virtual-targets += [ $(t).generate ] ;
+        virtual-targets += [ $(t).generate [ property-set.empty ] ] ;
     }    
 }
 
diff --git a/new/builtin.jam b/new/builtin.jam
index 6db1996a4..fc0656f07 100644
--- a/new/builtin.jam
+++ b/new/builtin.jam
@@ -293,8 +293,9 @@ rule lib-generator ( )
 {
     composing-generator.__init__ lib-generator : : LIB : <main-target-type>LIB ;
     
-    rule run ( project name ? : properties * : sources * )
+    rule run ( project name ? : property-set : sources * )
     {
+        local properties = [ $(property-set).raw ] ;
         # Determine the needed target type
         local actual-type ;
         if <search> in $(properties:G) || <name> in $(properties:G)
@@ -311,8 +312,8 @@ rule lib-generator ( )
         }
         # Construct the target. Pass 'allow-composing', since generators for 
         # library types are composing and we need to find them.
-        return [ generators.construct $(project) $(name) : $(actual-type) : $(properties)
-          : $(sources) : allow-composing ] ;
+        return [ generators.construct $(project) $(name) : $(actual-type) 
+                : $(property-set) : $(sources) : allow-composing ] ;
     }
 }
 
diff --git a/new/generators.jam b/new/generators.jam
index b2cab15ba..6426596c3 100644
--- a/new/generators.jam
+++ b/new/generators.jam
@@ -157,6 +157,7 @@ rule generator (
     # in returned set must be present in build properties if this 
     # generator is to be used. If result has grist-only element,
     # that build properties must include some value of that feature.
+    # XXX: remove this method?
     rule requirements ( )
     {
         return $(self.requirements) ;
@@ -173,7 +174,7 @@ rule generator (
     # Returns a number telling how good generator's properties match
     # the passed properties, or empty list if generator can't be run
     # at all.
-    rule match-rank ( properties * )
+    rule match-rank ( property-set )
     {
         # See if generator's requirements are satisfied by 'properties'.
         # Treat feature name in requirements (i.e. grist-only element),
@@ -192,7 +193,8 @@ rule generator (
                 features += $(r) ;
             }                      
         }
-                                  
+
+        local properties = [ $(property-set).raw ] ;
         if $(requirements) in $(properties) && $(features) in $(properties:G)
         {
             return [ sequence.length [ set.intersection 
@@ -217,7 +219,7 @@ rule generator (
     rule run ( project  # Project for which the targets are generated
                name ?   # Determines the name of 'name' attribute for 
                         # all generated targets. See 'generated-targets' method.
-               : properties * # Desired properties for generated targets.
+               : property-set # Desired properties for generated targets.
                : sources + :  # Source targets.
                multiple ? # Allows the rule to run generator several times and return
                           # multiple targets of the same type. When this argument is not
@@ -230,7 +232,7 @@ rule generator (
     {
         generators.dout [ indent ] "  generator" $(self.id) ;
         generators.dout [ indent ] "  multiple:" $(mutliple) ;
-                
+                        
         # Ordinary generators take only one source targets
         if $(sources[2])
         {
@@ -248,7 +250,7 @@ rule generator (
         local bypassed = ;
         
         convert-to-consumable-types $(project) $(name) : 
-          $(properties) : $(sources) : $(multiple)
+          $(property-set) : $(sources) : $(multiple)
           :
           : consumed bypassed ;
         
@@ -256,7 +258,7 @@ rule generator (
         if $(consumed)  
         {            
             result = [ construct-result $(consumed) : $(project) $(name) 
-                     : $(properties) ] ;
+                     : $(property-set) ] ;
         }
                             
         if $(result)
@@ -301,7 +303,7 @@ rule generator (
                    # Otherwise, might contain several targets with the type of 
                    # $(self.source-types[1])                               
         : project name ? 
-        : properties *  # Properties to be used for all actions create here
+        : property-set  # Properties to be used for all actions create here
     )
     {
         local result ;
@@ -311,7 +313,7 @@ rule generator (
             generators.dout [ indent ] "alt1" ;
             for local r in $(consumed)
             {                
-                result += [ generated-targets $(r) : $(properties) : $(project) $(name) ] ; #(targets) ;
+                result += [ generated-targets $(r) : $(property-set) : $(project) $(name) ] ; #(targets) ;
             }
         }
         else
@@ -320,7 +322,8 @@ rule generator (
             generators.dout [ indent ] "alt2 : consumed is" [ $(v).str ] ;
             if $(consumed) 
             {
-                result += [ generated-targets $(consumed) : $(properties) : $(project) $(name) ] ;
+                result += [ generated-targets $(consumed) : $(property-set) 
+                            : $(project) $(name) ] ;
             }                        
         }
         return $(result) ;
@@ -346,7 +349,7 @@ rule generator (
     # Note that this pattern mechanism has nothing to do with implicit patterns
     # in make. It's a way to produce target which name is different for name of 
     # source.
-    rule generated-targets ( sources + : properties * : project name ? )
+    rule generated-targets ( sources + : property-set : project name ? )
     {
         if ! $(name)
         {
@@ -382,7 +385,8 @@ rule generator (
         }                 
         # Assign an action for each target
         local action = [ action-class ] ;
-        local a = [ new $(action) $(targets) : $(sources) : $(self.id) : $(properties) ] ;
+        local a = [ new $(action) $(targets) : $(sources) : $(self.id) : 
+                    $(property-set) ] ;
         for local t in $(targets)
         {
             $(t).action $(a) ;
@@ -395,7 +399,7 @@ rule generator (
     # handle. The intention is to produce the set of targets can should be
     # used when generator is run.
     rule convert-to-consumable-types ( project name ? : 
-        properties * : source : multiple ? 
+        property-set : source : multiple ? 
         : only-one ? # convert 'source' to only one of source types
                      # if there's more that one possibility, report an
                      # error 
@@ -449,7 +453,7 @@ rule generator (
         if $(missing-types)
         {            
             local transformed = [ generators.construct-types $(project) $(name)
-              : $(missing-types) : $(multiple) : $(properties) : $(source) ] ;
+              : $(missing-types) : $(multiple) : $(property-set) : $(source) ] ;
                                 
             # Add targets of right type to 'consumed'. Add others to
             # 'bypassed'. The 'generators.construct' rule has done
@@ -468,8 +472,7 @@ rule generator (
                 }
             }               
         }   
-        
-        
+                
         $(consumed-var) += $(_consumed) ;
         $(bypassed-var) += $(_bypassed) ;
     }
@@ -492,7 +495,7 @@ rule composing-generator ( id : source-types * : target-types + :
     generator.__init__ $(id) : $(source-types) : $(target-types) :
                        $(requirements) ;
 
-    rule run ( project name ? : properties * : sources + ) 
+    rule run ( project name ? : property-set : sources + ) 
     {
         generators.dout [ indent ] "  composing generator" $(self.id) ;
 
@@ -507,7 +510,7 @@ rule composing-generator ( id : source-types * : target-types + :
             local c ;
             local b ;
             # TODO: need to check for failure on each source.
-            convert-to-consumable-types $(project) : $(properties)
+            convert-to-consumable-types $(project) : $(property-set)
               : $(sources[1]) : * : true : c b ;
             if ! $(c)
             {
@@ -523,7 +526,8 @@ rule composing-generator ( id : source-types * : target-types + :
         if ! $(failed) 
         {
             generators.dout [ indent ] "  SUCCESS" ;
-            result += [ generated-targets $(consumed) : $(properties) : $(project) $(name) ] ;
+            result += [ generated-targets $(consumed) : $(property-set) 
+                        : $(project) $(name) ] ;
             result += $(bypassed) ;
         } 
         else
@@ -622,9 +626,9 @@ rule base-to-derived-type-conversion ( targets * : target-types +
 
 
 rule try-one-generator ( project name ? : generator multiple ? : 
-    target-types + : properties * : sources * )
+    target-types + : property-set : sources * )
 {
-    local targets = [ $(generator).run $(project) $(name) : $(properties) : $(sources)
+    local targets = [ $(generator).run $(project) $(name) : $(property-set) : $(sources)
       : $(multiple) ] ;
 
     # Generated targets that are of required types
@@ -644,8 +648,8 @@ rule try-one-generator ( project name ? : generator multiple ? :
     {
         for local e in $(extra) 
         {
-            local try2 = [ construct-types $(project) $(name) : $(target-types) : : $(properties)
-              : $(e) ] ;
+            local try2 = [ construct-types $(project) $(name) 
+                       : $(target-types) : : $(property-set) : $(e) ] ;
     
             result += $(try2) ;
         }    
@@ -662,13 +666,13 @@ rule try-one-generator ( project name ? : generator multiple ? :
 }
 
 rule construct-types ( project name ? : target-types + : multiple ? : 
-    properties * : source )
+    property-set : source )
 {
     local result ;
     local matched-types ; 
     for local t in $(target-types)
     {
-        local r = [ construct $(project) $(name) : $(t) $(multiple) : $(properties) :
+        local r = [ construct $(project) $(name) : $(t) $(multiple) : $(property-set) :
           $(source) ] ;
         if $(r)
         {
@@ -719,7 +723,7 @@ local rule ensure-type ( targets * )
 #
 # Note: this algorithm explicitly ignores generators for base classes if there's
 # at least one generator for requested target-type.
-local rule find-viable-generators ( target-type : properties * : allow-composing ? )
+local rule find-viable-generators ( target-type : property-set : allow-composing ? )
 {
     # Select generators that can create the required target type.
     local viable-generators = ;
@@ -738,7 +742,7 @@ local rule find-viable-generators ( target-type : properties * : allow-composing
             if ! $(g) in $(.active-generators) 
               && ! ( [ is-a $(g) : composing-generator ] && ! $(allow-composing) )
               {       
-                  local m = [ $(g).match-rank $(properties) ] ;
+                  local m = [ $(g).match-rank $(property-set) ] ;
                   if $(m) 
                   {
                       viable-generators += $(g) ;
@@ -803,7 +807,7 @@ local rule select-dependency-graph ( options )
 
 # Attempt to construct the target by looking at transformation cache.
 local rule construct-with-caching (
-   project name ? : target-type multiple ? : properties * : sources * )
+   project name ? : target-type multiple ? : property-set : sources * )
 {     
     local result ;
     if ! $(.caching) && ! $(sources[2]) && $(sources[1]) && ! $(name)
@@ -812,7 +816,7 @@ local rule construct-with-caching (
         
         local t = $(sources[1]) ;            
             
-        local signature = [ sequence.join [ $(t).type ] $(target-type) $(properties) : - ] ;
+        local signature = [ sequence.join [ $(t).type ] $(target-type) $(property-set) : - ] ;
             
         # Get a transformation template from cache or create it.
         local cresult ;
@@ -823,7 +827,8 @@ local rule construct-with-caching (
         else 
         {                            
             local ut = [ new file-target % : [ $(t).type ] : "no project" ] ;            
-            cresult = [ construct $(project) : $(target-type) $(multiple) : $(properties) : $(ut) ] ;
+            cresult = [ construct $(project) : $(target-type) $(multiple) 
+              : $(property-set) : $(ut) ] ;
             .transformation.cache.$(signature) = $(cresult) ;                
         }
                                     
@@ -846,9 +851,9 @@ local rule construct-with-caching (
 # Attempts to construct target by finding viable generators, running them
 # and selecting the dependency graph
 local rule construct-without-caching (
-   project name ? : target-type multiple ? : properties * : sources * )
+   project name ? : target-type multiple ? : property-set : sources * )
 {
-    viable-generators = [ find-viable-generators $(target-type) : $(properties) 
+    viable-generators = [ find-viable-generators $(target-type) : $(property-set) 
       : $(allow-composing) ] ;
                     
     local results = [ new vector ] ;
@@ -862,7 +867,7 @@ local rule construct-without-caching (
         local .active-generators = $(g) $(.active-generators) ;
         
         local r = [ try-one-generator $(project) $(name) : $(g) $(multiple) : $(target-type) :
-          $(properties) : $(sources) ] ;
+          $(property-set) : $(sources) ] ;
         
         if $(r)
         {
@@ -885,7 +890,7 @@ local rule construct-without-caching (
 # 'construct' in stack, returns only targets of requested 'target-type',
 # otherwise, returns also unused sources and additionally generated
 # targets.    
-rule construct ( project name ? : target-type multiple ? : properties * : sources * 
+rule construct ( project name ? : target-type multiple ? : property-set * : sources * 
     : allow-composing ?  # Allows to use composing generators for constructing this
                          # target. This will be typically set when creating main targets,
                          # and unset when called recursively from 'run' method of 
@@ -905,8 +910,8 @@ rule construct ( project name ? : target-type multiple ? : properties * : source
             usage-requirements += [ $(e).usage-requirements ] ;
         }               
     }
-    properties += $(usage-requirements) ;
-    properties = [ sequence.unique $(properties) ] ;
+    property-set = [ $(property-set).add 
+      [ property-set.create $(usage-requirements) ] ] ;
     
     .construct-stack += 1 ;
 
@@ -926,11 +931,11 @@ rule construct ( project name ? : target-type multiple ? : properties * : source
     generators.dout [ indent ] "    properties:" $(properties) ;        
                
     local result = [ construct-with-caching $(project) $(name)  
-      : $(target-type) $(multiple) : $(properties) : $(sources) ] ;
+      : $(target-type) $(multiple) : $(property-set) : $(sources) ] ;
     
     if ! $(result)  {
         result = [ construct-without-caching $(project) $(name)  
-      : $(target-type) $(multiple) : $(properties) : $(sources) ] ;
+      : $(target-type) $(multiple) : $(property-set) : $(sources) ] ;
     }
                 
     decrease-indent ;
@@ -940,8 +945,8 @@ rule construct ( project name ? : target-type multiple ? : properties * : source
     if ! $(.construct-stack) # This is first invocation in stack
     {
         # Make roots of dependency graph depend on all 'dependency' features.
-        local dp = [ property.take dependency : $(properties) ] ;
-                       
+        local dp = [ $(property-set).dependency ] ;
+                               
         if $(dp)
         {      
             for local t in $(result)
diff --git a/new/make.jam b/new/make.jam
index cc561875f..f4a6c22c2 100644
--- a/new/make.jam
+++ b/new/make.jam
@@ -12,21 +12,23 @@ import property ;
 import errors : error ;
 import type : type ;
 import regex ;
+import property-set ;
 
 rule make-target-class ( name : project : sources * : requirements * 
                          : make-rule + : default-build * )
 {
     basic-target.__init__ $(name) : $(project) : $(sources) : $(requirements) 
                           : $(default-build) ;
+       
     self.make-rule = $(make-rule) ;    
     
-    rule construct ( source-targets * : properties * )
+    rule construct ( source-targets * : property-set )
     {
         local t = [ new file-target $(self.name:S=) : [ type.type $(self.name:S) ]
                     : $(self.project) ] ;
         $(t).suffix [ regex.match .(.*) : $(self.name:S) ] ;
         local a = [ new action $(t) : $(source-targets) : $(self.make-rule) 
-                    : $(properties) ] ;
+                    : $(property-set) ] ;
         $(t).action $(a) ;
         return $(t) ;    
     }   
diff --git a/new/prebuilt.jam b/new/prebuilt.jam
index ba278bd41..acd640ca9 100644
--- a/new/prebuilt.jam
+++ b/new/prebuilt.jam
@@ -21,8 +21,9 @@ rule prebuilt-file-generator
 {
     generator.__init__ prebuilt-file-generator : : * : <file> ;    
 
-    rule run ( project name ? : properties * : sources * )
+    rule run ( project name ? : property-set : sources * )
     {
+        local properties = [ $(property-set).raw ] ;
         local name = [ feature.get-values <file> : $(properties) ] ;
         local type = [ type.type $(name:S) ] ;
         if ! $(type) 
@@ -42,7 +43,7 @@ rule prebuilt-file-generator
         # Therefore, we encode properties via 'extra-grist', which is ugly.
         # Maybe, we should just introduce 'do-nothing-action', which only
         # keps properties.
-        $(t).extra-grist [ property.as-path $(properties) ] ;
+        $(t).extra-grist [ $(property-set).as-path ] ;
         $(t).suffix [ MATCH .(.*) : $(name:S) ] ;
         return $(t) ;            
         
diff --git a/new/project.jam b/new/project.jam
index 6cd3fa794..b4628a9b7 100644
--- a/new/project.jam
+++ b/new/project.jam
@@ -386,6 +386,14 @@ local rule initialize (
                   [ path.relative $(our-dir) $(parent-dir) ] ] : exact ;
         }        
     }
+    else
+    {
+        $(attributes).set requirements
+            : [ property-set.empty ] : exact ;
+        $(attributes).set usage-requirements
+            : [ property-set.empty ] : exact ;
+    }
+    
 }
 
 # Associate the given id with the given location
@@ -416,9 +424,16 @@ rule project-attributes ( location )
         {
             specification = [ property.translate-paths $(specification)
                               : $(self.location) ] ;
-            local current = $(self.requirements) ;
-            local result = [ property.refine $(current) : 
-                             [ property.make $(specification) ] ] ;
+            specification = [ property.make $(specification) ] ;
+            result = [ property-set.create $(specification) ] ;            
+            
+            # If we have inherited properties, need to refine them with the
+            # specified.
+            local current = $(self.requirements) ;                                    
+            if $(current)
+            {
+                result = [ $(current).refine $(result) ] ;
+            }
 
             if $(result[1]) = "@error"
             {
@@ -439,8 +454,17 @@ rule project-attributes ( location )
             {
                 errors.error "usage-requirements" $($(real-pos2)) "have non-free properties" $(non-free) ;
             }            
-            self.usage-requirements += [ property.translate-paths $(specification)
+            local t = [ property.translate-paths $(specification)
                                       : $(self.location) ] ;
+            if $(self.usage-requirements)
+            {
+                self.usage-requirements = [ property-set.create 
+                    [ $(self.usage-requirements).raw ] $(t) ] ;
+            }
+            else 
+            {
+                self.usage-requirements = [ property-set.create $(t) ] ;
+            }                        
         }        
         else if $(attribute) = "source-location"
         { 
@@ -480,7 +504,7 @@ rule project-attributes ( location )
         print.list-start ;
         print.list-item "Project root:" $(self.project-root) ;
         print.list-item "Parent project:" $(parent) ;
-        print.list-item "Requirements:" $(self.requirements) ;
+        print.list-item "Requirements:" [ $(self.requirements).raw ] ;
         print.list-item "Default build:" $(self.default-build) ;
         print.list-item "Source location:" $(self.source-location) ;
         print.list-item "Projects to build:" 
diff --git a/new/targets.jam b/new/targets.jam
index 8c40dfebf..8d1ebfbd2 100644
--- a/new/targets.jam
+++ b/new/targets.jam
@@ -72,6 +72,7 @@ import regex ;
 import property ;
 import errors ;
 import common ;
+import property-set ;
 
 
 # Base class for all abstract targets.
@@ -109,7 +110,7 @@ rule abstract-target ( name      # name of the target in Jamfile
     # Adds one more direct build request for this target. If later generate
     # is called with the same non-free non-incidental properties as in one
     # of direct build requests, then that build request is used instead.
-    rule direct-build-request ( properties * )
+    rule direct-build-request ( property-set )
     {
     }
     
@@ -122,7 +123,7 @@ rule abstract-target ( name      # name of the target in Jamfile
     #
     # If 'properties' are empty, performs default build of this target, in a way specific
     # to derived class.
-    rule generate ( properties * )
+    rule generate ( property-set )
     {
         errors.error "method should be defined in derived classes" ;
     }
@@ -137,29 +138,30 @@ rule project-target ( name : project : requirements * : default-build * )
     self.requirements = $(requirements) ;
     self.default-build = $(default-build) ;
 
-    rule direct-build-request ( properties * )
+    rule direct-build-request ( property-set )
     {
         for local name in $(self.main-targets)
         {
             local t = [ main-target $(name) ] ;
-            result += [ $(t).direct-build-request $(properties) ] ;
+            result += [ $(t).direct-build-request $(property-set) ] ;
         }
         for local pn in [ project.attribute $(self.project) projects-to-build ]
         {
             local p = [ project.module-name $(pn) ] ;
             local t = [ project.target [ project.attribute $(p) location ] ] ;
-            result += [ $(t).direct-build-request $(properties) ] ;
+            result += [ $(t).direct-build-request $(property-set) ] ;
         }            
     }
     
     # Generates all possible targets contained in this project.
-    rule generate ( properties * )
+    rule generate ( property-set * )
     {
         # Project properties are directly imposed on all main targets.
         # However, we'd need to check if this project can be build at
         # all.
-        local xproperties = 
-          [ property.refine $(properties) : $(self.requirements) ] ;
+        
+        local xproperties = [ $(property-set).refine $(self.requirements) ] ;
+
         if $(xproperties[1]) = "@error"
         {
             local id = [ project.attribute $(self.project) id ] ;
@@ -168,7 +170,7 @@ rule project-target ( name : project : requirements * : default-build * )
                "due to unsatisfied requirements." ;
             print.wrapped-text "warning: explanation: " $(xproperties[2-]) ;
             print.wrapped-text "warning: build-request: " $(properties) ;
-            print.wrapped-text "warning: requirements: " $(self.requirements) ;
+            print.wrapped-text "warning: requirements: " [ $(self.requirements).raw ] ;
         }
         else 
         {            
@@ -176,14 +178,14 @@ rule project-target ( name : project : requirements * : default-build * )
             for local name in $(self.main-targets)
             {
                 local t = [ main-target $(name) ] ;
-                result += [ $(t).generate $(properties) ] ;
+                result += [ $(t).generate $(property-set) ] ;
             }
             local self-location = [ project.attribute $(self.project) location ] ;
             for local pn in [ project.attribute $(self.project) projects-to-build ]
             {
                 local p = [ project.module-name [ path.join $(self-location) $(pn) ] ] ;
                 local t = [ project.target [ project.attribute $(p) location ] ] ;
-                result += [ $(t).generate $(properties) ] ;
+                result += [ $(t).generate $(property-set) ] ;
             }
             return $(result) ;
         }        
@@ -215,19 +217,19 @@ rule project-target ( name : project : requirements * : default-build * )
     # target in this project, if generation with
     # 'properties' is requested, and that main target 
     # does not have any requirements of its own.
-    rule reference-properties ( properties * )
+    rule reference-properties ( property-set )
     {
-        # Note that free properties can appear on 'properties' only
-        # from direct build request, because free properties are not
-        # allowed to be propagated.
-                
-        local ref = [ project.attribute $(self.project) requirements ] ;
-        ref = [ property.refine $(properties) : $(ref) ] ;
-        ref = [ property.evaluate-conditionals $(ref) ] ;
-        ref = [ property.take free : [ property.remove incidental : $(ref) ] ] ;
-        ref = [ targets.generate-dependencies $(ref) : $(self.project) ] ;
-        return $(ref) ;
-    }
+        if ! $(self.ref-props.$(property-set))
+        {            
+            local ref = [ project.attribute $(self.project) requirements ] ;
+            local ps = [ $(property-set).refine $(ref) ] ;
+            ps = [ $(ps).evaluate-conditionals ] ;
+            
+            ps = [ targets.generate-dependencies $(ps) : $(self.project) : $(ps) ] ;
+            self.ref-props.$(property-set) = $(ps) ;
+        }
+        return $(self.ref-props.$(property-set)) ;        
+    }    
     
 }
 class project-target : abstract-target ;
@@ -246,9 +248,9 @@ rule main-target ( name : project )
         self.alternatives += $(target) ;
     }
 
-    rule direct-build-request ( properties * )
+    rule direct-build-request ( property-set )
     {
-        local base = [ property.remove free incidental : $(properties) ] ;
+        local base = [ $(property-set).base ] ;
         local ep = $(self.direct-request.$(base:J=-)) ;
         if $(ep) && $(ep) != $(properties) 
         {
@@ -256,7 +258,7 @@ rule main-target ( name : project )
         }
         else
         {
-            self.direct-request.$(base:J=-) = $(properties) ;
+            self.direct-request.$(base:J=-) = $(property-set) ;
         }                
     }
     
@@ -265,13 +267,13 @@ rule main-target ( name : project )
     # which requirements are satisfied by 'properties' and picking the one with
     # longest requirements set.
     # Returns the result of calling 'generate' on that alternative.
-    rule generate ( properties * )
+    rule generate ( property-set )
     {
-        local base = [ property.remove free incidental : $(properties) ] ;
+        local base = [ $(property-set).base ] ;
         local ep = $(self.direct-request.$(base:J=-)) ;
         if $(ep) 
         {
-            properties = $(ep) ;
+            property-set = $(ep) ;
         }
         
         # Try to generate all the alternatives.
@@ -279,7 +281,7 @@ rule main-target ( name : project )
 
         for local v in $(self.alternatives)
         {
-            local vtargets = [ $(v).generate $(properties) ] ;
+            local vtargets = [ $(v).generate $(property-set) ] ;
             if $(vtargets) && $(vtargets[1]) != "@error"
             {
                 $(alternatives).push-back [ new vector $(v) $(vtargets) ] ;
@@ -291,7 +293,7 @@ rule main-target ( name : project )
             # why it can't be build.
             print.wrapped-text 
                 "warning: skipped build of" [ full-name ]
-                "with properties" $(properties) ;
+                "with properties" [ $(property-set).raw ]  ;
         } else {            
         local result ;
         if [ $(alternatives).size ] = 1 
@@ -314,9 +316,9 @@ rule main-target ( name : project )
                 # have 'requirements' method. 
                 # assert.equal [ is-a $(target) : basic-target ] : true ;
                 local req = [ $(target).requirements ] ;
-                req = [ property.remove free incidental : $(req) ] ;
+                req = [ $(req).base ] ;
                 req-length += [ sequence.length 
-                    [ set.intersection $(req) : $(properties) ] ] ;
+                    [ set.intersection $(req) : [ $(property-set).raw ] ] ] ;
             }
                         
             local best = [ sequence.select-highest-ranked $(r) : $(req-length) ] ;
@@ -343,7 +345,7 @@ rule main-target ( name : project )
         # is created.
         local all-targets = 
             [ sequence.transform virtual-target.traverse : $(result) ] ; 
-        local dg = [ new subvariant-dg $(__name__) : $(properties) : $(all-targets) ] ;
+        local dg = [ new subvariant-dg $(__name__) : $(property-set) : $(all-targets) ] ;
         for local v in $(all-targets)          
         {
             $(v).dg $(dg) ;            
@@ -361,7 +363,7 @@ class main-target : abstract-target ;
 # reference.
 rule generate ( target-reference # Target reference
     : project                    # Project where the reference is made
-    : properties *               # Properties of the main target that 
+    : property-set               # Properties of the main target that 
                                  # makes the reference
    )
 {
@@ -382,8 +384,9 @@ rule generate ( target-reference # Target reference
     if $(main-target) {
         # Take properties which should be propagated and refine them
         # with source-specific requirements.
-        local propagated = [ property.take propagated : $(properties) ] ;
-        local rproperties = [ property.refine $(propagated) : $(sproperties) ] ;
+        local propagated = [ $(property-set).propagated ] ;
+        local rproperties = [ $(propagated).refine 
+          [ property-set.create $(sproperties) ] ] ;
         if $(rproperties[1]) = "@error"
         {
             errors.error
@@ -395,42 +398,32 @@ rule generate ( target-reference # Target reference
     }    
 }
 
-# Returns a list of properties, where all dependency properties are
-# replaced as follows:
-# - the value of dependency property is treated as target reference,
-#   which is generated with 'properties' + 'extra-properties'
-# - the created virtual target's become replace the property value,
-#    for example <library>a/b might become 
-#    <library>object(virtual-target)@1
-# In addition, usage requirements for all created virtual targets
-# are added to the properties.
+# Returns new property set which inclues all properties from
+# 'property-set', except that all dependency properties are
+# generated with 'generation-ps', and the obtained virtual targets
+# are added as the values of original features.
 #
-# The purpose of 'extra-properties' is to be able to replace dependency
-# features only in certain set of properties, which does not include
-# all build properties. A concrete example is when we process use properties.
-# Dependency features must be replaced using full build properties of target,
-# but we don't want to add build properties to usage requirements.
-rule generate-dependencies ( properties * : project : extra-properties * )
+# For example, <library>a/b might become <library>object(virtual-target)@1
+# In addition, usage requirements for all created virtual targets
+# are added to the created property set.
+rule generate-dependencies ( property-set : project : generation-ps )
 {
-    local xproperties ;
-    for local p in $(properties)
+    local xproperties ;    
+    for local p in [ $(property-set).dependency ] 
     {
-        if dependency in [ feature.attributes $(p:G) ]
+        local g = [ targets.generate $(p:TG=) : $(project) : $(generation-ps) ] ;
+        if ! $(g) 
         {
-            local g = [ targets.generate $(p:TG=) : $(project) 
-              : $(properties) $(extra-properties) ] ;
-            if ! $(g) 
-            {
-                errors.error "cannot generate dependency " $(p) ;
-            }
-            xproperties += $(p:G)$(g) [ $(g).usage-requirements ] ;
+            errors.error "cannot generate dependency " $(p) ;
         }
-        else
-        {
-            xproperties += $(p) ;
-        }                        
+        xproperties += $(p:G)$(g) [ $(g).usage-requirements ] ;
     }
-    return $(xproperties) ;
+    local r = [ property-set.create 
+        [ $(property-set).base ] 
+        [ $(property-set).free ] 
+          $(xproperties)
+        [ $(property-set).incidental ] ] ;
+    return $(r) ;
 }
 
 
@@ -448,8 +441,15 @@ rule basic-target ( name : project
     abstract-target.__init__ $(name) : $(project) ;
 
     self.sources = $(sources) ;
+    if ! $(requirements) {
+        requirements = [ property-set.empty ] ;
+    }    
     self.requirements = $(requirements) ;
     self.default-build = $(default-build) ;
+    if ! $(usage-requirements)
+    {
+        usage-requirements = [ property-set.empty ] ;
+    }    
     self.usage-requirements = $(usage-requirements) ;
 
     if $(sources:G)
@@ -463,35 +463,31 @@ rule basic-target ( name : project
     # Generates sources. Calls 'construct'
     # This method should not be overriden.
     #
-    rule generate ( properties * )
+    rule generate ( property-set )
     {
-        if ! $(properties) || $(properties:G) = <toolset>
+        if ! [ $(property-set).raw ] 
         {
             # CONSIDER: I'm really not sure if this is correct...
             # FIXME: as in 'build-system' we stick default toolset
-            properties = [ build-request.expand $(properties) 
-                           $(self.default-build) ] ;
+            properties = [ build-request.expand $(self.default-build) ] ;
             
             local result = ;
             for local p in $(properties)
             {
-                result += [ generate [ feature.split $(p) ] ] ;
+                result += [ generate [ property-set.create [ feature.split $(p) ] ] ] ;
             }
             return $(result) ;
         } else {
 
-            property-path = [ property.as-path 
-                [ property.remove free incidental : $(properties) ] ] ;
+            
+            property-path = [ property.as-path [ $(property-set).base ] ] ;
             if ! $(property-path) 
             {
                 property-path = X ;
             }
             if ! $(self.generated.$(property-path)) 
             {
-                local rproperties =
-                    [ property.refine $(properties) : $(self.requirements) ] ;
-
-                rproperties = [ property.evaluate-conditionals $(rproperties) ] ;
+                local rproperties = [ $(property-set).refine $(self.requirements) ] ;
                                 
                 if $(rproperties[1]) != "@error"                    
                 {
@@ -503,9 +499,12 @@ rule basic-target ( name : project
                     # requirements may also code from dependencies. However, when they
                     # come from dependencies, the value is not target id, but rather
                     # virtual target names, so generators.construct can use them.
+                    
+                    rproperties = [ $(rproperties).evaluate-conditionals ] ;
 
                     local xproperties = 
-                      [ targets.generate-dependencies $(rproperties) : $(self.project) ] ;
+                      [ targets.generate-dependencies $(rproperties) : $(self.project) 
+                        : $(rproperties) ] ;
 
 
                     local source-targets ;
@@ -513,7 +512,7 @@ rule basic-target ( name : project
                     {
                         # Try treating this source as reference to main target
                         local more-targets = 
-                          [ targets.generate $(s) : $(self.project) : $(properties) ] ;
+                          [ targets.generate $(s) : $(self.project) : $(property-set) ] ;
                         if $(more-targets)
                         {
                             source-targets += $(more-targets) ;
@@ -529,16 +528,19 @@ rule basic-target ( name : project
                     # unqual to project's reference properties. As the
                     # result, we create per-target bin directory while
                     # it's not really needed.
-                    xproperties = [ feature.run-actions $(xproperties) ] ;
-                    
+                                        
+                    xproperties = [ $(xproperties).run-actions ] ;
+                               
                     self.generated.$(property-path) = 
                         [ construct $(source-targets) : $(xproperties) ] ;                             
                     
                     # Apply use requirement of this target to all generated
                     # virtual targets.
                     local xusage-requirements = 
-                      [ targets.generate-dependencies $(self.usage-requirements) 
+                      [ targets.generate-dependencies 
+                          $(self.usage-requirements) 
                         : $(self.project) : $(rproperties) ] ;
+                    xusage-requirements = [ $(xusage-requirements).raw ] ;
                     
                     for local e in $(self.generated.$(property-path))                    
                     {
@@ -579,11 +581,11 @@ rule typed-target ( name : project : type
     
     self.type = $(type) ;
     
-    rule construct ( source-targets * : properties * )
+    rule construct ( source-targets * : property-set )
     {
         local r = [ generators.construct $(self.project) $(self.name) : $(self.type) 
-          : $(properties) # [ feature.expand
-              <main-target-type>$(self.type)
+          : [ property-set.create [ $(property-set).raw ] # [ feature.expand
+              <main-target-type>$(self.type) ]
           # ]
             : $(source-targets) 
             : allow-composing ] ;
@@ -609,8 +611,9 @@ rule main-target-requirements (
 {
     local loc = [ project.attribute $(project) location ] ;
     local requirements = [ property.translate-paths $(specification) : $(loc) ] ; 
+    local requirements = [ property-set.create $(requirements) ] ;
     local project-requirements = [ project.attribute $(project) requirements ] ;
-    requirements = [ property.refine $(project-requirements) : $(requirements) ] ;
+    requirements = [ $(project-requirements).refine $(requirements) ] ;    
     if $(requirements[1]) = "@error" 
     {
         errors.error "Conflicting requirements for target:" $(requirements) ;
@@ -629,11 +632,11 @@ rule main-target-usage-requirements (
 {
     local loc = [ project.attribute $(project) location ] ;         
     local project-usage-requirements = [ project.attribute $(project) usage-requirements ] ;
-
-    local usage-requirements = [ property.translate-paths $(specification) : $(loc) ] ;
-    usage-requirements += $(project-usage-requirements) ;
-
-    return $(usage-requirements) ;
+        
+    local usage-requirements = [ property-set.create 
+        [ property.translate-paths $(specification) : $(loc) ] ] ;
+    
+    return [ $(project-usage-requirements).add $(usage-requirements) ] ;
 }
 
 # Return the default build value to use when declaring a main target,
diff --git a/new/virtual-target.jam b/new/virtual-target.jam
index 7f3be6f9b..ec63fde8d 100644
--- a/new/virtual-target.jam
+++ b/new/virtual-target.jam
@@ -10,6 +10,8 @@
 
 import class : class new ;
 import type ;
+import property-set ;
+import utility ;
 
 #                       +--------------------------+
 #                       | virtual-target           |
@@ -349,8 +351,8 @@ rule abstract-file-target ( name
             local properties ;
             if $(self.action)
             {
-                properties = [ property.remove free incidental : [ $(self.action).properties ] ] ;
-                local property-grist = [ property.as-path $(properties) ] ;
+                local ps = [ $(self.action).properties-ps ] ;     
+                local property-grist = [ $(ps).as-path ] ;
                 grist = $(location-grist)/$(property-grist) ;
             }
             if ! $(grist)
@@ -447,21 +449,16 @@ rule file-target (
      {
          if $(self.action)
          {
-             local properties = [ property.take free : [ property.remove incidental :
-                 [ $(self.action).properties  ] ] ] ;
-
+             local ps = [ $(self.action).properties-ps ] ;
+             
              local main-target = [ $(self.dg).main-target ] ;
              local project = [ $(main-target).project ] ;
              local plocation = [ project.attribute $(project) location ] ;
              local ptarget = [ project.target $(plocation) ] ;
-             local ref = [ $(ptarget).reference-properties [ $(self.dg).properties ] ] ;
+             local ref-ps = [ $(ptarget).reference-properties [ $(self.dg).properties-ps ] ] ;
 
-             properties = [ sequence.insertion-sort
-                            [ sequence.unique $(properties) ] ] ;
-             ref = [ sequence.insertion-sort
-                     [ sequence.unique $(ref) ] ] ;
 
-             if $(properties) != $(ref)
+             if [ $(ps).free ] != [ $(ref-ps).free ]
              {
                  self.extra-path = [ sequence.join main-target- [ $(main-target).name ] ] ;
              }
@@ -491,7 +488,7 @@ rule file-target (
                              [ $(self.action).path ]
                              $(self.extra-path)
                          ] ;
-
+            
             return [ path.native $(path) ] ;
         }
      }
@@ -522,13 +519,24 @@ rule remember-binding ( target : bound-path )
 #     rule action-name ( targets + : sources * : properties * )
 # Targets and sources are passed as actual jam targets. The rule may
 # not establish dependency relationship, but should do everything else.
-rule action ( targets + : sources * : action-name : properties * )
+rule action ( targets + : sources * : action-name : property-set ? )
 {
     self.targets = $(targets) ;
     self.sources = $(sources) ;
     self.action-name = $(action-name) ;
-    self.properties = $(properties) ;
-
+    
+    if ! $(property-set) 
+    {
+        property-set = [ property-set.empty ] ;
+    }
+        
+    if ! [ class.is-instance $(property-set) ]
+    {        
+        errors.error "Property set instance required" ;
+    }
+    
+    self.properties = $(property-set) ;
+    
     rule targets ( )
     {
         return $(self.targets) ;
@@ -544,7 +552,7 @@ rule action ( targets + : sources * : action-name : properties * )
         return $(self.action-name) ;
     }
 
-    rule properties ( )
+    rule properties-ps ( )
     {
         return $(self.properties) ;
     }
@@ -556,7 +564,8 @@ rule action ( targets + : sources * : action-name : properties * )
         {
             self.actualized = true ;
 
-            local properties = [ adjust-properties [ properties ] ] ;
+            local ps = [ properties-ps ] ;
+            local properties = [ adjust-properties [ $(ps).raw ] ] ;
 
 
             local actual-targets ;
@@ -601,12 +610,10 @@ rule action ( targets + : sources * : action-name : properties * )
 
     rule path ( )
     {
-        local subvariant = [ property.remove free incidental : $(self.properties) ] ;
-        local pp = [ property.as-path $(subvariant) ] ;
-        return $(pp) ;
+        local p = [ $(self.properties).as-path ] ;
+        return $(p) ;
     }
 
-
     # Determined real properties when trying building with 'properties'.
     # This is last chance to fix properties, for example to adjust includes
     # to get generated headers correctly. Default implementation returns
@@ -678,7 +685,7 @@ rule register ( target )
                 result = $(t) ;
             }
             else if $(a1) && $(a2) && [ $(a1).action-name ] = [ $(a2).action-name ]
-              && [ $(a1).properties ] = [ $(a2).properties ] && [ $(a1).sources ] = [ $(a2).sources ]
+              && [ $(a1).properties-ps ] = [ $(a2).properties-ps ] && [ $(a1).sources ] = [ $(a2).sources ]
             {
                 result = $(t) ;
             }
@@ -801,18 +808,19 @@ local rule clone-action-template ( action from cloned-from : new-source )
 
     local action-class = [ modules.peek $(action) : __class__ ] ;
 
+    local ps = [ $(action).properties-ps ] ;
     local cloned = [ new $(action-class) [ $(action).targets ] : $(sources)
-                     : [ $(action).action-name ] : [ $(action).properties ] ] ;
+                     : [ $(action).action-name ] : $(ps) ] ;
 
     return $(cloned) ;
 }
 
 local rule subvariant-dg ( main-target # The instance of main-target class
-    : properties *                     # Properties requested for this target
+    : property-set                     # Properties requested for this target
     : virtual-targets * )
 {
     self.main-target = $(main-target) ;
-    self.properties = $(properties) ;
+    self.properties = $(property-set) ;
     self.virtual-targets = $(virtual-targets) ;
 
     # Pre-compose the list of other dependency graphs, on which this one
@@ -836,19 +844,28 @@ local rule subvariant-dg ( main-target # The instance of main-target class
         }
     }
     self.other-dg = [ sequence.unique $(self.other-dg) ] ;
-
+   
     rule main-target ( )
     {
         return $(self.main-target) ;
     }
 
-    rule properties ( )
+    rule properties-ps ( )
     {
         return $(self.properties) ;
     }
-
+    
     rule all-target-directories ( )
     {
+        if ! $(self.target-directories)
+        {
+            compute-target-directories ;
+        }                
+        return $(self.target-directories) ;
+    }
+    
+    rule compute-target-directories ( )
+    {        
         local result ;
         for local t in $(self.virtual-targets)
         {
@@ -858,8 +875,8 @@ local rule subvariant-dg ( main-target # The instance of main-target class
         {
             result += [ $(d).all-target-directories ] ;
         }
-        return $(result) ;
-    }
+        self.target-directories = $(result) ;
+    }   
 }
 
 class subvariant-dg ;
diff --git a/v2/build/generators.jam b/v2/build/generators.jam
index b2cab15ba..6426596c3 100644
--- a/v2/build/generators.jam
+++ b/v2/build/generators.jam
@@ -157,6 +157,7 @@ rule generator (
     # in returned set must be present in build properties if this 
     # generator is to be used. If result has grist-only element,
     # that build properties must include some value of that feature.
+    # XXX: remove this method?
     rule requirements ( )
     {
         return $(self.requirements) ;
@@ -173,7 +174,7 @@ rule generator (
     # Returns a number telling how good generator's properties match
     # the passed properties, or empty list if generator can't be run
     # at all.
-    rule match-rank ( properties * )
+    rule match-rank ( property-set )
     {
         # See if generator's requirements are satisfied by 'properties'.
         # Treat feature name in requirements (i.e. grist-only element),
@@ -192,7 +193,8 @@ rule generator (
                 features += $(r) ;
             }                      
         }
-                                  
+
+        local properties = [ $(property-set).raw ] ;
         if $(requirements) in $(properties) && $(features) in $(properties:G)
         {
             return [ sequence.length [ set.intersection 
@@ -217,7 +219,7 @@ rule generator (
     rule run ( project  # Project for which the targets are generated
                name ?   # Determines the name of 'name' attribute for 
                         # all generated targets. See 'generated-targets' method.
-               : properties * # Desired properties for generated targets.
+               : property-set # Desired properties for generated targets.
                : sources + :  # Source targets.
                multiple ? # Allows the rule to run generator several times and return
                           # multiple targets of the same type. When this argument is not
@@ -230,7 +232,7 @@ rule generator (
     {
         generators.dout [ indent ] "  generator" $(self.id) ;
         generators.dout [ indent ] "  multiple:" $(mutliple) ;
-                
+                        
         # Ordinary generators take only one source targets
         if $(sources[2])
         {
@@ -248,7 +250,7 @@ rule generator (
         local bypassed = ;
         
         convert-to-consumable-types $(project) $(name) : 
-          $(properties) : $(sources) : $(multiple)
+          $(property-set) : $(sources) : $(multiple)
           :
           : consumed bypassed ;
         
@@ -256,7 +258,7 @@ rule generator (
         if $(consumed)  
         {            
             result = [ construct-result $(consumed) : $(project) $(name) 
-                     : $(properties) ] ;
+                     : $(property-set) ] ;
         }
                             
         if $(result)
@@ -301,7 +303,7 @@ rule generator (
                    # Otherwise, might contain several targets with the type of 
                    # $(self.source-types[1])                               
         : project name ? 
-        : properties *  # Properties to be used for all actions create here
+        : property-set  # Properties to be used for all actions create here
     )
     {
         local result ;
@@ -311,7 +313,7 @@ rule generator (
             generators.dout [ indent ] "alt1" ;
             for local r in $(consumed)
             {                
-                result += [ generated-targets $(r) : $(properties) : $(project) $(name) ] ; #(targets) ;
+                result += [ generated-targets $(r) : $(property-set) : $(project) $(name) ] ; #(targets) ;
             }
         }
         else
@@ -320,7 +322,8 @@ rule generator (
             generators.dout [ indent ] "alt2 : consumed is" [ $(v).str ] ;
             if $(consumed) 
             {
-                result += [ generated-targets $(consumed) : $(properties) : $(project) $(name) ] ;
+                result += [ generated-targets $(consumed) : $(property-set) 
+                            : $(project) $(name) ] ;
             }                        
         }
         return $(result) ;
@@ -346,7 +349,7 @@ rule generator (
     # Note that this pattern mechanism has nothing to do with implicit patterns
     # in make. It's a way to produce target which name is different for name of 
     # source.
-    rule generated-targets ( sources + : properties * : project name ? )
+    rule generated-targets ( sources + : property-set : project name ? )
     {
         if ! $(name)
         {
@@ -382,7 +385,8 @@ rule generator (
         }                 
         # Assign an action for each target
         local action = [ action-class ] ;
-        local a = [ new $(action) $(targets) : $(sources) : $(self.id) : $(properties) ] ;
+        local a = [ new $(action) $(targets) : $(sources) : $(self.id) : 
+                    $(property-set) ] ;
         for local t in $(targets)
         {
             $(t).action $(a) ;
@@ -395,7 +399,7 @@ rule generator (
     # handle. The intention is to produce the set of targets can should be
     # used when generator is run.
     rule convert-to-consumable-types ( project name ? : 
-        properties * : source : multiple ? 
+        property-set : source : multiple ? 
         : only-one ? # convert 'source' to only one of source types
                      # if there's more that one possibility, report an
                      # error 
@@ -449,7 +453,7 @@ rule generator (
         if $(missing-types)
         {            
             local transformed = [ generators.construct-types $(project) $(name)
-              : $(missing-types) : $(multiple) : $(properties) : $(source) ] ;
+              : $(missing-types) : $(multiple) : $(property-set) : $(source) ] ;
                                 
             # Add targets of right type to 'consumed'. Add others to
             # 'bypassed'. The 'generators.construct' rule has done
@@ -468,8 +472,7 @@ rule generator (
                 }
             }               
         }   
-        
-        
+                
         $(consumed-var) += $(_consumed) ;
         $(bypassed-var) += $(_bypassed) ;
     }
@@ -492,7 +495,7 @@ rule composing-generator ( id : source-types * : target-types + :
     generator.__init__ $(id) : $(source-types) : $(target-types) :
                        $(requirements) ;
 
-    rule run ( project name ? : properties * : sources + ) 
+    rule run ( project name ? : property-set : sources + ) 
     {
         generators.dout [ indent ] "  composing generator" $(self.id) ;
 
@@ -507,7 +510,7 @@ rule composing-generator ( id : source-types * : target-types + :
             local c ;
             local b ;
             # TODO: need to check for failure on each source.
-            convert-to-consumable-types $(project) : $(properties)
+            convert-to-consumable-types $(project) : $(property-set)
               : $(sources[1]) : * : true : c b ;
             if ! $(c)
             {
@@ -523,7 +526,8 @@ rule composing-generator ( id : source-types * : target-types + :
         if ! $(failed) 
         {
             generators.dout [ indent ] "  SUCCESS" ;
-            result += [ generated-targets $(consumed) : $(properties) : $(project) $(name) ] ;
+            result += [ generated-targets $(consumed) : $(property-set) 
+                        : $(project) $(name) ] ;
             result += $(bypassed) ;
         } 
         else
@@ -622,9 +626,9 @@ rule base-to-derived-type-conversion ( targets * : target-types +
 
 
 rule try-one-generator ( project name ? : generator multiple ? : 
-    target-types + : properties * : sources * )
+    target-types + : property-set : sources * )
 {
-    local targets = [ $(generator).run $(project) $(name) : $(properties) : $(sources)
+    local targets = [ $(generator).run $(project) $(name) : $(property-set) : $(sources)
       : $(multiple) ] ;
 
     # Generated targets that are of required types
@@ -644,8 +648,8 @@ rule try-one-generator ( project name ? : generator multiple ? :
     {
         for local e in $(extra) 
         {
-            local try2 = [ construct-types $(project) $(name) : $(target-types) : : $(properties)
-              : $(e) ] ;
+            local try2 = [ construct-types $(project) $(name) 
+                       : $(target-types) : : $(property-set) : $(e) ] ;
     
             result += $(try2) ;
         }    
@@ -662,13 +666,13 @@ rule try-one-generator ( project name ? : generator multiple ? :
 }
 
 rule construct-types ( project name ? : target-types + : multiple ? : 
-    properties * : source )
+    property-set : source )
 {
     local result ;
     local matched-types ; 
     for local t in $(target-types)
     {
-        local r = [ construct $(project) $(name) : $(t) $(multiple) : $(properties) :
+        local r = [ construct $(project) $(name) : $(t) $(multiple) : $(property-set) :
           $(source) ] ;
         if $(r)
         {
@@ -719,7 +723,7 @@ local rule ensure-type ( targets * )
 #
 # Note: this algorithm explicitly ignores generators for base classes if there's
 # at least one generator for requested target-type.
-local rule find-viable-generators ( target-type : properties * : allow-composing ? )
+local rule find-viable-generators ( target-type : property-set : allow-composing ? )
 {
     # Select generators that can create the required target type.
     local viable-generators = ;
@@ -738,7 +742,7 @@ local rule find-viable-generators ( target-type : properties * : allow-composing
             if ! $(g) in $(.active-generators) 
               && ! ( [ is-a $(g) : composing-generator ] && ! $(allow-composing) )
               {       
-                  local m = [ $(g).match-rank $(properties) ] ;
+                  local m = [ $(g).match-rank $(property-set) ] ;
                   if $(m) 
                   {
                       viable-generators += $(g) ;
@@ -803,7 +807,7 @@ local rule select-dependency-graph ( options )
 
 # Attempt to construct the target by looking at transformation cache.
 local rule construct-with-caching (
-   project name ? : target-type multiple ? : properties * : sources * )
+   project name ? : target-type multiple ? : property-set : sources * )
 {     
     local result ;
     if ! $(.caching) && ! $(sources[2]) && $(sources[1]) && ! $(name)
@@ -812,7 +816,7 @@ local rule construct-with-caching (
         
         local t = $(sources[1]) ;            
             
-        local signature = [ sequence.join [ $(t).type ] $(target-type) $(properties) : - ] ;
+        local signature = [ sequence.join [ $(t).type ] $(target-type) $(property-set) : - ] ;
             
         # Get a transformation template from cache or create it.
         local cresult ;
@@ -823,7 +827,8 @@ local rule construct-with-caching (
         else 
         {                            
             local ut = [ new file-target % : [ $(t).type ] : "no project" ] ;            
-            cresult = [ construct $(project) : $(target-type) $(multiple) : $(properties) : $(ut) ] ;
+            cresult = [ construct $(project) : $(target-type) $(multiple) 
+              : $(property-set) : $(ut) ] ;
             .transformation.cache.$(signature) = $(cresult) ;                
         }
                                     
@@ -846,9 +851,9 @@ local rule construct-with-caching (
 # Attempts to construct target by finding viable generators, running them
 # and selecting the dependency graph
 local rule construct-without-caching (
-   project name ? : target-type multiple ? : properties * : sources * )
+   project name ? : target-type multiple ? : property-set : sources * )
 {
-    viable-generators = [ find-viable-generators $(target-type) : $(properties) 
+    viable-generators = [ find-viable-generators $(target-type) : $(property-set) 
       : $(allow-composing) ] ;
                     
     local results = [ new vector ] ;
@@ -862,7 +867,7 @@ local rule construct-without-caching (
         local .active-generators = $(g) $(.active-generators) ;
         
         local r = [ try-one-generator $(project) $(name) : $(g) $(multiple) : $(target-type) :
-          $(properties) : $(sources) ] ;
+          $(property-set) : $(sources) ] ;
         
         if $(r)
         {
@@ -885,7 +890,7 @@ local rule construct-without-caching (
 # 'construct' in stack, returns only targets of requested 'target-type',
 # otherwise, returns also unused sources and additionally generated
 # targets.    
-rule construct ( project name ? : target-type multiple ? : properties * : sources * 
+rule construct ( project name ? : target-type multiple ? : property-set * : sources * 
     : allow-composing ?  # Allows to use composing generators for constructing this
                          # target. This will be typically set when creating main targets,
                          # and unset when called recursively from 'run' method of 
@@ -905,8 +910,8 @@ rule construct ( project name ? : target-type multiple ? : properties * : source
             usage-requirements += [ $(e).usage-requirements ] ;
         }               
     }
-    properties += $(usage-requirements) ;
-    properties = [ sequence.unique $(properties) ] ;
+    property-set = [ $(property-set).add 
+      [ property-set.create $(usage-requirements) ] ] ;
     
     .construct-stack += 1 ;
 
@@ -926,11 +931,11 @@ rule construct ( project name ? : target-type multiple ? : properties * : source
     generators.dout [ indent ] "    properties:" $(properties) ;        
                
     local result = [ construct-with-caching $(project) $(name)  
-      : $(target-type) $(multiple) : $(properties) : $(sources) ] ;
+      : $(target-type) $(multiple) : $(property-set) : $(sources) ] ;
     
     if ! $(result)  {
         result = [ construct-without-caching $(project) $(name)  
-      : $(target-type) $(multiple) : $(properties) : $(sources) ] ;
+      : $(target-type) $(multiple) : $(property-set) : $(sources) ] ;
     }
                 
     decrease-indent ;
@@ -940,8 +945,8 @@ rule construct ( project name ? : target-type multiple ? : properties * : source
     if ! $(.construct-stack) # This is first invocation in stack
     {
         # Make roots of dependency graph depend on all 'dependency' features.
-        local dp = [ property.take dependency : $(properties) ] ;
-                       
+        local dp = [ $(property-set).dependency ] ;
+                               
         if $(dp)
         {      
             for local t in $(result)
diff --git a/v2/build/project.jam b/v2/build/project.jam
index 6cd3fa794..b4628a9b7 100644
--- a/v2/build/project.jam
+++ b/v2/build/project.jam
@@ -386,6 +386,14 @@ local rule initialize (
                   [ path.relative $(our-dir) $(parent-dir) ] ] : exact ;
         }        
     }
+    else
+    {
+        $(attributes).set requirements
+            : [ property-set.empty ] : exact ;
+        $(attributes).set usage-requirements
+            : [ property-set.empty ] : exact ;
+    }
+    
 }
 
 # Associate the given id with the given location
@@ -416,9 +424,16 @@ rule project-attributes ( location )
         {
             specification = [ property.translate-paths $(specification)
                               : $(self.location) ] ;
-            local current = $(self.requirements) ;
-            local result = [ property.refine $(current) : 
-                             [ property.make $(specification) ] ] ;
+            specification = [ property.make $(specification) ] ;
+            result = [ property-set.create $(specification) ] ;            
+            
+            # If we have inherited properties, need to refine them with the
+            # specified.
+            local current = $(self.requirements) ;                                    
+            if $(current)
+            {
+                result = [ $(current).refine $(result) ] ;
+            }
 
             if $(result[1]) = "@error"
             {
@@ -439,8 +454,17 @@ rule project-attributes ( location )
             {
                 errors.error "usage-requirements" $($(real-pos2)) "have non-free properties" $(non-free) ;
             }            
-            self.usage-requirements += [ property.translate-paths $(specification)
+            local t = [ property.translate-paths $(specification)
                                       : $(self.location) ] ;
+            if $(self.usage-requirements)
+            {
+                self.usage-requirements = [ property-set.create 
+                    [ $(self.usage-requirements).raw ] $(t) ] ;
+            }
+            else 
+            {
+                self.usage-requirements = [ property-set.create $(t) ] ;
+            }                        
         }        
         else if $(attribute) = "source-location"
         { 
@@ -480,7 +504,7 @@ rule project-attributes ( location )
         print.list-start ;
         print.list-item "Project root:" $(self.project-root) ;
         print.list-item "Parent project:" $(parent) ;
-        print.list-item "Requirements:" $(self.requirements) ;
+        print.list-item "Requirements:" [ $(self.requirements).raw ] ;
         print.list-item "Default build:" $(self.default-build) ;
         print.list-item "Source location:" $(self.source-location) ;
         print.list-item "Projects to build:" 
diff --git a/v2/build/targets.jam b/v2/build/targets.jam
index 8c40dfebf..8d1ebfbd2 100644
--- a/v2/build/targets.jam
+++ b/v2/build/targets.jam
@@ -72,6 +72,7 @@ import regex ;
 import property ;
 import errors ;
 import common ;
+import property-set ;
 
 
 # Base class for all abstract targets.
@@ -109,7 +110,7 @@ rule abstract-target ( name      # name of the target in Jamfile
     # Adds one more direct build request for this target. If later generate
     # is called with the same non-free non-incidental properties as in one
     # of direct build requests, then that build request is used instead.
-    rule direct-build-request ( properties * )
+    rule direct-build-request ( property-set )
     {
     }
     
@@ -122,7 +123,7 @@ rule abstract-target ( name      # name of the target in Jamfile
     #
     # If 'properties' are empty, performs default build of this target, in a way specific
     # to derived class.
-    rule generate ( properties * )
+    rule generate ( property-set )
     {
         errors.error "method should be defined in derived classes" ;
     }
@@ -137,29 +138,30 @@ rule project-target ( name : project : requirements * : default-build * )
     self.requirements = $(requirements) ;
     self.default-build = $(default-build) ;
 
-    rule direct-build-request ( properties * )
+    rule direct-build-request ( property-set )
     {
         for local name in $(self.main-targets)
         {
             local t = [ main-target $(name) ] ;
-            result += [ $(t).direct-build-request $(properties) ] ;
+            result += [ $(t).direct-build-request $(property-set) ] ;
         }
         for local pn in [ project.attribute $(self.project) projects-to-build ]
         {
             local p = [ project.module-name $(pn) ] ;
             local t = [ project.target [ project.attribute $(p) location ] ] ;
-            result += [ $(t).direct-build-request $(properties) ] ;
+            result += [ $(t).direct-build-request $(property-set) ] ;
         }            
     }
     
     # Generates all possible targets contained in this project.
-    rule generate ( properties * )
+    rule generate ( property-set * )
     {
         # Project properties are directly imposed on all main targets.
         # However, we'd need to check if this project can be build at
         # all.
-        local xproperties = 
-          [ property.refine $(properties) : $(self.requirements) ] ;
+        
+        local xproperties = [ $(property-set).refine $(self.requirements) ] ;
+
         if $(xproperties[1]) = "@error"
         {
             local id = [ project.attribute $(self.project) id ] ;
@@ -168,7 +170,7 @@ rule project-target ( name : project : requirements * : default-build * )
                "due to unsatisfied requirements." ;
             print.wrapped-text "warning: explanation: " $(xproperties[2-]) ;
             print.wrapped-text "warning: build-request: " $(properties) ;
-            print.wrapped-text "warning: requirements: " $(self.requirements) ;
+            print.wrapped-text "warning: requirements: " [ $(self.requirements).raw ] ;
         }
         else 
         {            
@@ -176,14 +178,14 @@ rule project-target ( name : project : requirements * : default-build * )
             for local name in $(self.main-targets)
             {
                 local t = [ main-target $(name) ] ;
-                result += [ $(t).generate $(properties) ] ;
+                result += [ $(t).generate $(property-set) ] ;
             }
             local self-location = [ project.attribute $(self.project) location ] ;
             for local pn in [ project.attribute $(self.project) projects-to-build ]
             {
                 local p = [ project.module-name [ path.join $(self-location) $(pn) ] ] ;
                 local t = [ project.target [ project.attribute $(p) location ] ] ;
-                result += [ $(t).generate $(properties) ] ;
+                result += [ $(t).generate $(property-set) ] ;
             }
             return $(result) ;
         }        
@@ -215,19 +217,19 @@ rule project-target ( name : project : requirements * : default-build * )
     # target in this project, if generation with
     # 'properties' is requested, and that main target 
     # does not have any requirements of its own.
-    rule reference-properties ( properties * )
+    rule reference-properties ( property-set )
     {
-        # Note that free properties can appear on 'properties' only
-        # from direct build request, because free properties are not
-        # allowed to be propagated.
-                
-        local ref = [ project.attribute $(self.project) requirements ] ;
-        ref = [ property.refine $(properties) : $(ref) ] ;
-        ref = [ property.evaluate-conditionals $(ref) ] ;
-        ref = [ property.take free : [ property.remove incidental : $(ref) ] ] ;
-        ref = [ targets.generate-dependencies $(ref) : $(self.project) ] ;
-        return $(ref) ;
-    }
+        if ! $(self.ref-props.$(property-set))
+        {            
+            local ref = [ project.attribute $(self.project) requirements ] ;
+            local ps = [ $(property-set).refine $(ref) ] ;
+            ps = [ $(ps).evaluate-conditionals ] ;
+            
+            ps = [ targets.generate-dependencies $(ps) : $(self.project) : $(ps) ] ;
+            self.ref-props.$(property-set) = $(ps) ;
+        }
+        return $(self.ref-props.$(property-set)) ;        
+    }    
     
 }
 class project-target : abstract-target ;
@@ -246,9 +248,9 @@ rule main-target ( name : project )
         self.alternatives += $(target) ;
     }
 
-    rule direct-build-request ( properties * )
+    rule direct-build-request ( property-set )
     {
-        local base = [ property.remove free incidental : $(properties) ] ;
+        local base = [ $(property-set).base ] ;
         local ep = $(self.direct-request.$(base:J=-)) ;
         if $(ep) && $(ep) != $(properties) 
         {
@@ -256,7 +258,7 @@ rule main-target ( name : project )
         }
         else
         {
-            self.direct-request.$(base:J=-) = $(properties) ;
+            self.direct-request.$(base:J=-) = $(property-set) ;
         }                
     }
     
@@ -265,13 +267,13 @@ rule main-target ( name : project )
     # which requirements are satisfied by 'properties' and picking the one with
     # longest requirements set.
     # Returns the result of calling 'generate' on that alternative.
-    rule generate ( properties * )
+    rule generate ( property-set )
     {
-        local base = [ property.remove free incidental : $(properties) ] ;
+        local base = [ $(property-set).base ] ;
         local ep = $(self.direct-request.$(base:J=-)) ;
         if $(ep) 
         {
-            properties = $(ep) ;
+            property-set = $(ep) ;
         }
         
         # Try to generate all the alternatives.
@@ -279,7 +281,7 @@ rule main-target ( name : project )
 
         for local v in $(self.alternatives)
         {
-            local vtargets = [ $(v).generate $(properties) ] ;
+            local vtargets = [ $(v).generate $(property-set) ] ;
             if $(vtargets) && $(vtargets[1]) != "@error"
             {
                 $(alternatives).push-back [ new vector $(v) $(vtargets) ] ;
@@ -291,7 +293,7 @@ rule main-target ( name : project )
             # why it can't be build.
             print.wrapped-text 
                 "warning: skipped build of" [ full-name ]
-                "with properties" $(properties) ;
+                "with properties" [ $(property-set).raw ]  ;
         } else {            
         local result ;
         if [ $(alternatives).size ] = 1 
@@ -314,9 +316,9 @@ rule main-target ( name : project )
                 # have 'requirements' method. 
                 # assert.equal [ is-a $(target) : basic-target ] : true ;
                 local req = [ $(target).requirements ] ;
-                req = [ property.remove free incidental : $(req) ] ;
+                req = [ $(req).base ] ;
                 req-length += [ sequence.length 
-                    [ set.intersection $(req) : $(properties) ] ] ;
+                    [ set.intersection $(req) : [ $(property-set).raw ] ] ] ;
             }
                         
             local best = [ sequence.select-highest-ranked $(r) : $(req-length) ] ;
@@ -343,7 +345,7 @@ rule main-target ( name : project )
         # is created.
         local all-targets = 
             [ sequence.transform virtual-target.traverse : $(result) ] ; 
-        local dg = [ new subvariant-dg $(__name__) : $(properties) : $(all-targets) ] ;
+        local dg = [ new subvariant-dg $(__name__) : $(property-set) : $(all-targets) ] ;
         for local v in $(all-targets)          
         {
             $(v).dg $(dg) ;            
@@ -361,7 +363,7 @@ class main-target : abstract-target ;
 # reference.
 rule generate ( target-reference # Target reference
     : project                    # Project where the reference is made
-    : properties *               # Properties of the main target that 
+    : property-set               # Properties of the main target that 
                                  # makes the reference
    )
 {
@@ -382,8 +384,9 @@ rule generate ( target-reference # Target reference
     if $(main-target) {
         # Take properties which should be propagated and refine them
         # with source-specific requirements.
-        local propagated = [ property.take propagated : $(properties) ] ;
-        local rproperties = [ property.refine $(propagated) : $(sproperties) ] ;
+        local propagated = [ $(property-set).propagated ] ;
+        local rproperties = [ $(propagated).refine 
+          [ property-set.create $(sproperties) ] ] ;
         if $(rproperties[1]) = "@error"
         {
             errors.error
@@ -395,42 +398,32 @@ rule generate ( target-reference # Target reference
     }    
 }
 
-# Returns a list of properties, where all dependency properties are
-# replaced as follows:
-# - the value of dependency property is treated as target reference,
-#   which is generated with 'properties' + 'extra-properties'
-# - the created virtual target's become replace the property value,
-#    for example <library>a/b might become 
-#    <library>object(virtual-target)@1
-# In addition, usage requirements for all created virtual targets
-# are added to the properties.
+# Returns new property set which inclues all properties from
+# 'property-set', except that all dependency properties are
+# generated with 'generation-ps', and the obtained virtual targets
+# are added as the values of original features.
 #
-# The purpose of 'extra-properties' is to be able to replace dependency
-# features only in certain set of properties, which does not include
-# all build properties. A concrete example is when we process use properties.
-# Dependency features must be replaced using full build properties of target,
-# but we don't want to add build properties to usage requirements.
-rule generate-dependencies ( properties * : project : extra-properties * )
+# For example, <library>a/b might become <library>object(virtual-target)@1
+# In addition, usage requirements for all created virtual targets
+# are added to the created property set.
+rule generate-dependencies ( property-set : project : generation-ps )
 {
-    local xproperties ;
-    for local p in $(properties)
+    local xproperties ;    
+    for local p in [ $(property-set).dependency ] 
     {
-        if dependency in [ feature.attributes $(p:G) ]
+        local g = [ targets.generate $(p:TG=) : $(project) : $(generation-ps) ] ;
+        if ! $(g) 
         {
-            local g = [ targets.generate $(p:TG=) : $(project) 
-              : $(properties) $(extra-properties) ] ;
-            if ! $(g) 
-            {
-                errors.error "cannot generate dependency " $(p) ;
-            }
-            xproperties += $(p:G)$(g) [ $(g).usage-requirements ] ;
+            errors.error "cannot generate dependency " $(p) ;
         }
-        else
-        {
-            xproperties += $(p) ;
-        }                        
+        xproperties += $(p:G)$(g) [ $(g).usage-requirements ] ;
     }
-    return $(xproperties) ;
+    local r = [ property-set.create 
+        [ $(property-set).base ] 
+        [ $(property-set).free ] 
+          $(xproperties)
+        [ $(property-set).incidental ] ] ;
+    return $(r) ;
 }
 
 
@@ -448,8 +441,15 @@ rule basic-target ( name : project
     abstract-target.__init__ $(name) : $(project) ;
 
     self.sources = $(sources) ;
+    if ! $(requirements) {
+        requirements = [ property-set.empty ] ;
+    }    
     self.requirements = $(requirements) ;
     self.default-build = $(default-build) ;
+    if ! $(usage-requirements)
+    {
+        usage-requirements = [ property-set.empty ] ;
+    }    
     self.usage-requirements = $(usage-requirements) ;
 
     if $(sources:G)
@@ -463,35 +463,31 @@ rule basic-target ( name : project
     # Generates sources. Calls 'construct'
     # This method should not be overriden.
     #
-    rule generate ( properties * )
+    rule generate ( property-set )
     {
-        if ! $(properties) || $(properties:G) = <toolset>
+        if ! [ $(property-set).raw ] 
         {
             # CONSIDER: I'm really not sure if this is correct...
             # FIXME: as in 'build-system' we stick default toolset
-            properties = [ build-request.expand $(properties) 
-                           $(self.default-build) ] ;
+            properties = [ build-request.expand $(self.default-build) ] ;
             
             local result = ;
             for local p in $(properties)
             {
-                result += [ generate [ feature.split $(p) ] ] ;
+                result += [ generate [ property-set.create [ feature.split $(p) ] ] ] ;
             }
             return $(result) ;
         } else {
 
-            property-path = [ property.as-path 
-                [ property.remove free incidental : $(properties) ] ] ;
+            
+            property-path = [ property.as-path [ $(property-set).base ] ] ;
             if ! $(property-path) 
             {
                 property-path = X ;
             }
             if ! $(self.generated.$(property-path)) 
             {
-                local rproperties =
-                    [ property.refine $(properties) : $(self.requirements) ] ;
-
-                rproperties = [ property.evaluate-conditionals $(rproperties) ] ;
+                local rproperties = [ $(property-set).refine $(self.requirements) ] ;
                                 
                 if $(rproperties[1]) != "@error"                    
                 {
@@ -503,9 +499,12 @@ rule basic-target ( name : project
                     # requirements may also code from dependencies. However, when they
                     # come from dependencies, the value is not target id, but rather
                     # virtual target names, so generators.construct can use them.
+                    
+                    rproperties = [ $(rproperties).evaluate-conditionals ] ;
 
                     local xproperties = 
-                      [ targets.generate-dependencies $(rproperties) : $(self.project) ] ;
+                      [ targets.generate-dependencies $(rproperties) : $(self.project) 
+                        : $(rproperties) ] ;
 
 
                     local source-targets ;
@@ -513,7 +512,7 @@ rule basic-target ( name : project
                     {
                         # Try treating this source as reference to main target
                         local more-targets = 
-                          [ targets.generate $(s) : $(self.project) : $(properties) ] ;
+                          [ targets.generate $(s) : $(self.project) : $(property-set) ] ;
                         if $(more-targets)
                         {
                             source-targets += $(more-targets) ;
@@ -529,16 +528,19 @@ rule basic-target ( name : project
                     # unqual to project's reference properties. As the
                     # result, we create per-target bin directory while
                     # it's not really needed.
-                    xproperties = [ feature.run-actions $(xproperties) ] ;
-                    
+                                        
+                    xproperties = [ $(xproperties).run-actions ] ;
+                               
                     self.generated.$(property-path) = 
                         [ construct $(source-targets) : $(xproperties) ] ;                             
                     
                     # Apply use requirement of this target to all generated
                     # virtual targets.
                     local xusage-requirements = 
-                      [ targets.generate-dependencies $(self.usage-requirements) 
+                      [ targets.generate-dependencies 
+                          $(self.usage-requirements) 
                         : $(self.project) : $(rproperties) ] ;
+                    xusage-requirements = [ $(xusage-requirements).raw ] ;
                     
                     for local e in $(self.generated.$(property-path))                    
                     {
@@ -579,11 +581,11 @@ rule typed-target ( name : project : type
     
     self.type = $(type) ;
     
-    rule construct ( source-targets * : properties * )
+    rule construct ( source-targets * : property-set )
     {
         local r = [ generators.construct $(self.project) $(self.name) : $(self.type) 
-          : $(properties) # [ feature.expand
-              <main-target-type>$(self.type)
+          : [ property-set.create [ $(property-set).raw ] # [ feature.expand
+              <main-target-type>$(self.type) ]
           # ]
             : $(source-targets) 
             : allow-composing ] ;
@@ -609,8 +611,9 @@ rule main-target-requirements (
 {
     local loc = [ project.attribute $(project) location ] ;
     local requirements = [ property.translate-paths $(specification) : $(loc) ] ; 
+    local requirements = [ property-set.create $(requirements) ] ;
     local project-requirements = [ project.attribute $(project) requirements ] ;
-    requirements = [ property.refine $(project-requirements) : $(requirements) ] ;
+    requirements = [ $(project-requirements).refine $(requirements) ] ;    
     if $(requirements[1]) = "@error" 
     {
         errors.error "Conflicting requirements for target:" $(requirements) ;
@@ -629,11 +632,11 @@ rule main-target-usage-requirements (
 {
     local loc = [ project.attribute $(project) location ] ;         
     local project-usage-requirements = [ project.attribute $(project) usage-requirements ] ;
-
-    local usage-requirements = [ property.translate-paths $(specification) : $(loc) ] ;
-    usage-requirements += $(project-usage-requirements) ;
-
-    return $(usage-requirements) ;
+        
+    local usage-requirements = [ property-set.create 
+        [ property.translate-paths $(specification) : $(loc) ] ] ;
+    
+    return [ $(project-usage-requirements).add $(usage-requirements) ] ;
 }
 
 # Return the default build value to use when declaring a main target,
diff --git a/v2/build/virtual-target.jam b/v2/build/virtual-target.jam
index 7f3be6f9b..ec63fde8d 100644
--- a/v2/build/virtual-target.jam
+++ b/v2/build/virtual-target.jam
@@ -10,6 +10,8 @@
 
 import class : class new ;
 import type ;
+import property-set ;
+import utility ;
 
 #                       +--------------------------+
 #                       | virtual-target           |
@@ -349,8 +351,8 @@ rule abstract-file-target ( name
             local properties ;
             if $(self.action)
             {
-                properties = [ property.remove free incidental : [ $(self.action).properties ] ] ;
-                local property-grist = [ property.as-path $(properties) ] ;
+                local ps = [ $(self.action).properties-ps ] ;     
+                local property-grist = [ $(ps).as-path ] ;
                 grist = $(location-grist)/$(property-grist) ;
             }
             if ! $(grist)
@@ -447,21 +449,16 @@ rule file-target (
      {
          if $(self.action)
          {
-             local properties = [ property.take free : [ property.remove incidental :
-                 [ $(self.action).properties  ] ] ] ;
-
+             local ps = [ $(self.action).properties-ps ] ;
+             
              local main-target = [ $(self.dg).main-target ] ;
              local project = [ $(main-target).project ] ;
              local plocation = [ project.attribute $(project) location ] ;
              local ptarget = [ project.target $(plocation) ] ;
-             local ref = [ $(ptarget).reference-properties [ $(self.dg).properties ] ] ;
+             local ref-ps = [ $(ptarget).reference-properties [ $(self.dg).properties-ps ] ] ;
 
-             properties = [ sequence.insertion-sort
-                            [ sequence.unique $(properties) ] ] ;
-             ref = [ sequence.insertion-sort
-                     [ sequence.unique $(ref) ] ] ;
 
-             if $(properties) != $(ref)
+             if [ $(ps).free ] != [ $(ref-ps).free ]
              {
                  self.extra-path = [ sequence.join main-target- [ $(main-target).name ] ] ;
              }
@@ -491,7 +488,7 @@ rule file-target (
                              [ $(self.action).path ]
                              $(self.extra-path)
                          ] ;
-
+            
             return [ path.native $(path) ] ;
         }
      }
@@ -522,13 +519,24 @@ rule remember-binding ( target : bound-path )
 #     rule action-name ( targets + : sources * : properties * )
 # Targets and sources are passed as actual jam targets. The rule may
 # not establish dependency relationship, but should do everything else.
-rule action ( targets + : sources * : action-name : properties * )
+rule action ( targets + : sources * : action-name : property-set ? )
 {
     self.targets = $(targets) ;
     self.sources = $(sources) ;
     self.action-name = $(action-name) ;
-    self.properties = $(properties) ;
-
+    
+    if ! $(property-set) 
+    {
+        property-set = [ property-set.empty ] ;
+    }
+        
+    if ! [ class.is-instance $(property-set) ]
+    {        
+        errors.error "Property set instance required" ;
+    }
+    
+    self.properties = $(property-set) ;
+    
     rule targets ( )
     {
         return $(self.targets) ;
@@ -544,7 +552,7 @@ rule action ( targets + : sources * : action-name : properties * )
         return $(self.action-name) ;
     }
 
-    rule properties ( )
+    rule properties-ps ( )
     {
         return $(self.properties) ;
     }
@@ -556,7 +564,8 @@ rule action ( targets + : sources * : action-name : properties * )
         {
             self.actualized = true ;
 
-            local properties = [ adjust-properties [ properties ] ] ;
+            local ps = [ properties-ps ] ;
+            local properties = [ adjust-properties [ $(ps).raw ] ] ;
 
 
             local actual-targets ;
@@ -601,12 +610,10 @@ rule action ( targets + : sources * : action-name : properties * )
 
     rule path ( )
     {
-        local subvariant = [ property.remove free incidental : $(self.properties) ] ;
-        local pp = [ property.as-path $(subvariant) ] ;
-        return $(pp) ;
+        local p = [ $(self.properties).as-path ] ;
+        return $(p) ;
     }
 
-
     # Determined real properties when trying building with 'properties'.
     # This is last chance to fix properties, for example to adjust includes
     # to get generated headers correctly. Default implementation returns
@@ -678,7 +685,7 @@ rule register ( target )
                 result = $(t) ;
             }
             else if $(a1) && $(a2) && [ $(a1).action-name ] = [ $(a2).action-name ]
-              && [ $(a1).properties ] = [ $(a2).properties ] && [ $(a1).sources ] = [ $(a2).sources ]
+              && [ $(a1).properties-ps ] = [ $(a2).properties-ps ] && [ $(a1).sources ] = [ $(a2).sources ]
             {
                 result = $(t) ;
             }
@@ -801,18 +808,19 @@ local rule clone-action-template ( action from cloned-from : new-source )
 
     local action-class = [ modules.peek $(action) : __class__ ] ;
 
+    local ps = [ $(action).properties-ps ] ;
     local cloned = [ new $(action-class) [ $(action).targets ] : $(sources)
-                     : [ $(action).action-name ] : [ $(action).properties ] ] ;
+                     : [ $(action).action-name ] : $(ps) ] ;
 
     return $(cloned) ;
 }
 
 local rule subvariant-dg ( main-target # The instance of main-target class
-    : properties *                     # Properties requested for this target
+    : property-set                     # Properties requested for this target
     : virtual-targets * )
 {
     self.main-target = $(main-target) ;
-    self.properties = $(properties) ;
+    self.properties = $(property-set) ;
     self.virtual-targets = $(virtual-targets) ;
 
     # Pre-compose the list of other dependency graphs, on which this one
@@ -836,19 +844,28 @@ local rule subvariant-dg ( main-target # The instance of main-target class
         }
     }
     self.other-dg = [ sequence.unique $(self.other-dg) ] ;
-
+   
     rule main-target ( )
     {
         return $(self.main-target) ;
     }
 
-    rule properties ( )
+    rule properties-ps ( )
     {
         return $(self.properties) ;
     }
-
+    
     rule all-target-directories ( )
     {
+        if ! $(self.target-directories)
+        {
+            compute-target-directories ;
+        }                
+        return $(self.target-directories) ;
+    }
+    
+    rule compute-target-directories ( )
+    {        
         local result ;
         for local t in $(self.virtual-targets)
         {
@@ -858,8 +875,8 @@ local rule subvariant-dg ( main-target # The instance of main-target class
         {
             result += [ $(d).all-target-directories ] ;
         }
-        return $(result) ;
-    }
+        self.target-directories = $(result) ;
+    }   
 }
 
 class subvariant-dg ;
diff --git a/v2/tools/builtin.jam b/v2/tools/builtin.jam
index 6db1996a4..fc0656f07 100644
--- a/v2/tools/builtin.jam
+++ b/v2/tools/builtin.jam
@@ -293,8 +293,9 @@ rule lib-generator ( )
 {
     composing-generator.__init__ lib-generator : : LIB : <main-target-type>LIB ;
     
-    rule run ( project name ? : properties * : sources * )
+    rule run ( project name ? : property-set : sources * )
     {
+        local properties = [ $(property-set).raw ] ;
         # Determine the needed target type
         local actual-type ;
         if <search> in $(properties:G) || <name> in $(properties:G)
@@ -311,8 +312,8 @@ rule lib-generator ( )
         }
         # Construct the target. Pass 'allow-composing', since generators for 
         # library types are composing and we need to find them.
-        return [ generators.construct $(project) $(name) : $(actual-type) : $(properties)
-          : $(sources) : allow-composing ] ;
+        return [ generators.construct $(project) $(name) : $(actual-type) 
+                : $(property-set) : $(sources) : allow-composing ] ;
     }
 }
 
diff --git a/v2/tools/make.jam b/v2/tools/make.jam
index cc561875f..f4a6c22c2 100644
--- a/v2/tools/make.jam
+++ b/v2/tools/make.jam
@@ -12,21 +12,23 @@ import property ;
 import errors : error ;
 import type : type ;
 import regex ;
+import property-set ;
 
 rule make-target-class ( name : project : sources * : requirements * 
                          : make-rule + : default-build * )
 {
     basic-target.__init__ $(name) : $(project) : $(sources) : $(requirements) 
                           : $(default-build) ;
+       
     self.make-rule = $(make-rule) ;    
     
-    rule construct ( source-targets * : properties * )
+    rule construct ( source-targets * : property-set )
     {
         local t = [ new file-target $(self.name:S=) : [ type.type $(self.name:S) ]
                     : $(self.project) ] ;
         $(t).suffix [ regex.match .(.*) : $(self.name:S) ] ;
         local a = [ new action $(t) : $(source-targets) : $(self.make-rule) 
-                    : $(properties) ] ;
+                    : $(property-set) ] ;
         $(t).action $(a) ;
         return $(t) ;    
     }   
diff --git a/v2/tools/prebuilt.jam b/v2/tools/prebuilt.jam
index ba278bd41..acd640ca9 100644
--- a/v2/tools/prebuilt.jam
+++ b/v2/tools/prebuilt.jam
@@ -21,8 +21,9 @@ rule prebuilt-file-generator
 {
     generator.__init__ prebuilt-file-generator : : * : <file> ;    
 
-    rule run ( project name ? : properties * : sources * )
+    rule run ( project name ? : property-set : sources * )
     {
+        local properties = [ $(property-set).raw ] ;
         local name = [ feature.get-values <file> : $(properties) ] ;
         local type = [ type.type $(name:S) ] ;
         if ! $(type) 
@@ -42,7 +43,7 @@ rule prebuilt-file-generator
         # Therefore, we encode properties via 'extra-grist', which is ugly.
         # Maybe, we should just introduce 'do-nothing-action', which only
         # keps properties.
-        $(t).extra-grist [ property.as-path $(properties) ] ;
+        $(t).extra-grist [ $(property-set).as-path ] ;
         $(t).suffix [ MATCH .(.*) : $(name:S) ] ;
         return $(t) ;