Future Income
Higher inflation is translating into higher income and dividend growth from the companies in our universe, as raw material price increases are pushed onto customers, while increases in staff and fixed costs are being maintained at growth rates significantly lower than inflation. The fund therefore remains on track to deliver double-digit distribution growth this year.

Capital
Since March 2000, global equity markets have declined significantly. This has translated into negative price movements for many of the Financial and Industrial companies listed of the JSE Securities Exchange, while the values of resource-based companies, although not immune to global market woes, have been boosted by the rapid depreciation of the Rand against all major currencies. For this reason, the yield on the Marriott Dividend Growth Fund has risen from below 3% in 2002 to its current level of 3.5%. Higher official interest rates have also played their part in depressing the price of financial assets in South Africa. There is no doubt that South African shares are cheap by historical standards, however, in the short-term, capital volatility is likely to persist until global markets stabilise and economic growth improves. For longer-term investors, the current dividend yield of 3.5% is attractive, with the prospect of capital growth of 15% per annum in the medium term as the South African equity market reverts towards the longer-term average dividend yield of 3%.

Future Income
Higher inflation is translating into higher income and dividend growth from the companies in our universe, as raw material price increases are pushed onto customers, while increases in staff and fixed costs are being maintained at growth rates significantly lower than inflation. The fund therefore remains on track to deliver double-digit distribution growth this year.
Capital
Since March 2000, global equity markets have declined significantly. This has translated into negative price movements for many of the Financial and Industrial companies listed of the JSE Securities Exchange, while the values of Resource-based companies, although not immune to global market woes, have been boosted by the rapid depreciation of the rand against all major currencies. For this reason, the yield on the Marriott Dividend Growth Fund has risen from below 3% in 2002 to its current level of 3.7%. Higher official interest rates have also played their part in depressing the price of financial assets in South Africa. There is no doubt that South African shares are cheap by historical standards, however, in the short-term, capital volatility is likely to persist until global markets stabilise and economic growth improves. For longer-term investors, the current dividend yield of 3.7% is attractive, with the prospect of capital growth of 15% per annum in the medium term as the South African equity market reverts towards the longer-term average dividend yield of 3%.

The dividend yield on the Marriott Dividend Growth Fund is just below 4%, a level last seen at the height of the Asian debt crisis in 1998. With dividends forecast to grow at 12% per annum over the next five years, inflation expected to fall within the Reserve Banks' target of between 3% and 6% within the next two to three years and interest rates to follow inflation lower, investors should enjoy above-average equity returns in the medium-term.

South African equity markets once again took their cue from global markets, with the All Share index finishing the month more than 10% lower than its June closing level. The sell-off in global equity markets was sparked by further evidence of accounting irregularities at major US corporations and the subsequent deterioration in investor confidence. The result is a tax-free income yield on the Marriott Dividend Growth Fund in excess of 3.5%, with income forecast to grow between 10% and 12% over the next three years.

Another disappointing month for global equity markets translated into negative returns for the JSE All Share index. Accounting and disclosure issues at some of the largest corporations in the United States have left investors questioning earnings growth numbers and the quality and reliability of the managers of these large corporations. By focussing on South African-listed companies that pay growing dividends (and therefore are generating positive cash flows), the Marriott Dividend Growth Fund is providing investors with a level of comfort in an otherwise nervous equity environment. The June distribution of 27.71c was in line with forecasts and the fund remains on track to deliver dividend growth this year of between 10% and 12%, having grown dividends by 9.5% in 2001 and 15.9% in 2000.

The Marriott Dividend Growth Fund is the only fund competing with the Old Mutual High Yield Opportunity Fund. The Marriott Dividend Growth Fund is losing this competition. The Marriott Dividend Growth Fund has shown relative improvement since September 2002, but the fund needs to prove the sustainability of this newfound increased performance. The income yield (3.3%) of the Marriott fund also leaves room for improvement.

During May 2002, the South African equity market was influenced by the rand's appreciation against all major currencies and a stronger gold price. The result was a 3% increase in the value of the JSE All Share index, while the Financial index was flat and the Industrial index gained 2%. The stronger Rand has meant that earnings growth prospects for South Africa's exporters and foreign-based companies, which dominate the JSE All Share index, have been scaled back. The Marriott Dividend Growth Fund is however still forecast to deliver distribution growth in excess of 10% in 2002, having delivered double-digit growth in distributions in 2000 and 2001.

A shift in fortunes on the JSE Securities Exchange saw Financial and Industrial counters significantly outperform their Resources counterparts, despite gold touching a high of US$311 per ounce. The main reason for the divergence in performance was the stronger Rand, which finished the month at R10.55/US Dollar. Financial counters were also boosted by Nedcor's friendly bid for 100% of BoE. On the income front, Allied Technologies ("Altech") declared a 100c dividend for the year ended 28 Feb 2002, representing growth of 25% over the previous year. The yield on the fund is 3.27%, while the yield on the All Share index is 3.05% and the yield on the Financial and Industrial index is 2.85%.

March was another reasonable month for the South African equity market. The JSE All Share index returned 1.5%, with Resources once again outperforming Financials and Industrials, albeit by a single percentage point. For the second time this year, the South African Reserve Bank raised the repo rate by 1%, placing further pressure on Bank valuations, although the sector did stage a recovery towards the end of the month. At current levels, the South African Banking sector continues to offer significant value and the fund has maintained its overweight position in the large banks. During the month, the fund replaced its holding in BoE Ltd with a position in Nedcor Ltd. The BoE shares were sold at levels 20% above the current price.
The yield on the dividend growth fund is currently 3.42%, which compares with the yield on the All ShareiIndex of 3.06% and the yield on the Financial & Industrial index of 3.01%.

The Marriott Dividend Growth Fund benefited from the 15% depreciation of the Rand against the US dollar through its exposure to a number of Rand-hedge companies. Prospects for a global economic recovery are improving supporting current equity valuations.