The third quarter of 2010 has been very encouraging for South African equity investors, as the market has become increasing optimistic as a result of an increasing fl ow of positive economic data stemming from developed economies. Investors in the Dividend Growth Fund would be particularly pleased to note, that the value of the fund increased by some 11% in this three month period. However, with rising unemployment , reduced access and demand for credit by consumers and the increasing cost of energy in South Africa, investors need to be cautious of extrapolating this recent rally into the future. The companies selected for inclusion in the fund have sustainable competitive advantages which enables these businesses to retain and grow their customer base, protect margins, and increase their dividend payments despite the current economic downturn. This income focused approach to equity investing has not only provided investors with a reliable and growing dividend income stream, but the Dividend Growth Fund is also currently the best performing general equity fund over a 3, 2, and 1 year period. The fund's distribution grew 9% this quarter.

The second quarter of 2010 has proved to be a challenging 3 months for the majority of South African equity investors. With the Global Financial Crisis finally in the rear view mirror Investors have typically become overly optimistic about the road ahead. One of the many repercussions of the credit crisis brought to the fore most recently with the effective bailout of Greece by the ECB, has been the significant accumulation of debt on the balance sheets of Sovereigns around the world. With the majority of major economies now needing to implement austerity measures to varying degrees - an additional challenging to rising unemployment, reduced access and demand for credit by consumers and the increased cost of energy - post-recession economic growth in SA similar to that which was achieved pre-recession will be challenging to achieve. This "recent" reality has weighed heavily on our market with the RSA All share losing 8% of its value during the quarter.

With a comparatively minor 0.6% loss during the equivalent period the fund's strategy of only investing in businesses with track records demonstrating their ability to successfully grow profits in challenging economic conditions at appropriate yields is proving effective. The companies selected for inclusion in the Dividend Growth Fund have sustainable competitive advantages which enables these businesses to retain and grow their customer base, protect margins, and increase their dividend payments despite the current economic downturn. These businesses include brands such as Vodacom, Spar, Altech, Tiger Brands and British American Tobacco which are currently trading at acceptable yields.

The fi rst quarter of 2010 saw the Marriott Dividend Growth Fund increasing in value by 4.7% following on from a 25.6% increase in value for 2009. Dividend yields in most RSA companies are currently well below historic averages as a result of increasing share prices and a decline in dividends. Considering that meaningful dividend growth will be challenging to sustain as a result of reduced access and demand for credit by consumers, an increased level of unemployment and rising electricity and energy prices, the majority of shares listed on the JSE look overvalued. When investing in RSA equities investors should select businesses with track records demonstrating their ability to successfully grow profi ts in challenging economic conditions at appropriate yields. The companies selected for inclusion in the Dividend Growth Fund have sustainable competitive advantages which enables these businesses to retain and grow their customer base, protect margins, and increase their dividend payments despite the current economic downturn. These businesses include household names such as Mr. Price, Spar, Altech, Tiger Brands and Massmart which are currently trading at acceptable yields. The current dividend yield of the fund is 3.09% which compares favourably to the RSA All Share Index which is yielding 1.99%

2009 has been a good year for the Marriott Dividend Growth Fund with the fund increasing in value by just over 25%. A decision was taken in the early part of July to reduce the 30% hedge position due to the unusually high dividend yields of the fund's holdings and the resilience demonstrated by these companies. In hindsight this was a good decision as the fund posted the majority of its gains during the July to December period. The dividends from South African equities declined by more than 20% during 2009 as businesses in South Africa felt the brunt of the global recession. This has not been the case for the Marriott Dividend Growth Fund with the majority of the fund's holdings managing to maintain or even increase dividend payouts to shareholders . The recent declines in distribution have been a result of the impact of declining interest rates on the fund's increased cash balance, and not as a result of declining dividend distribution from the underlying portfolio. The relatively large cash weighting has been used to protect the fund against price volatility. With the recent interest rate declines coming to an end, our expectation is for continued distribution growth from this point on. The companies selected for inclusion in the fund have sustainable competitive advantages which enable them to retain and grow their customer base, protect margins, and increase, or at least maintain, their dividend payments despite the current economic downturn. These businesses include household names such as Mr. Price, Spar, Altech, Tiger Brands and Massmart. Consequently the fund has demonstrated commendable resilience in what has been a very diffi cult and volatile environment for equity investors and is ideally positioned for 2010.