Global equity markets and investor sentiment have continued to be volatile during the current quarter. Those searching for some logic to explain the shift from despair to hope will, most likely, be confounded. Banking crises and debt repayment schedules do not disappear overnight. Markets are, however, unable to focus on more than one or two themes at any one time despite the abundance of news flow. Currently, therefore, the focus is on second quarter earnings from US companies; the travails of Greece, Portugal and so on have been sidelined, at least for the time being. So far, the reporting season has been good. Over three quarters of S&P 500 companies have reported earnings either in line or better than analysts' expectations. Dividend growth is back on the agenda, balance sheets are looking a little more robust and for every day that passes, the threat of a double-dip recession, which occupied the market throughout the second quarter, is receding. When the market is in this sort of mood, pessimism could lead to missing out on further rises. Good news is greeted with euphoria and bad news breezily dismissed. All of this, of course, makes it doubly difficult to manage equity based portfolios in the short term and makes it even more important to focus on longer term fundamentals, including dividend growth. Sometimes, under exceptional circumstances, even this sort of sensible strategic planning can be thrown into confusion. We have just passed through one of the most serious economic crises in modern history. Companies have been obliged to reduce dividend payouts, major businesses have collapsed, even whole countries have wobbled and so it is little wonder that equity markets remain jittery. The BP oil leak and the political reaction are almost without precedent, driving volatility higher and fraying already worn nerves. Events of this magnitude drive investors to seek safety in the form of gold, the US Dollar and Government bonds. Whilst they may have been right in the short term, in the medium term we are increasingly confident that equity markets will regain their poise and investors will recognise some of the very attractive yields on offer at historically low multiples. With the fund paying close to 5% by way of a gross dividend yield, we think that this represents something of a bargain for those willing to look through the short term volatility and through to the resumption of corporate growth.

Whilst June represented one of the poorest months on recent record for global equity markets (-5.9% in sterling terms) July has been a far better month. Those searching for some logic to explain the shift from despair to hope will, most likely, be confounded. Banking crises and debt repayment schedules do not disappear overnight. Markets are, however, unable to focus on more than one or two themes at any one time despite the abundance of news flow. Currently, therefore, the focus is on second quarter earnings from US companies; the travails of Greece, Portugal and so on have been sidelined, at least for the time being. So far, the reporting season has been good. Over three quarters of S&P 500 companies have reported earnings either in line or better than analysts' expectations. Dividend growth is back on the agenda, balance sheets are looking a little more robust and for every day that passes, the threat of a double-dip recession, which occupied the market throughout the second quarter, is receding. When the market is in this sort of mood, pessimism could lead to missing out on further rises. Good news is greeted with euphoria and bad news breezily dismissed. All of this, of course, makes it doubly difficult to manage equity based portfolios in the short term and makes it even more important to focus on longer term fundamentals, including dividend growth.

Sometimes, under exceptional circumstances, even this sort of sensible strategic planning can be thrown into confusion. We have just passed through one of the most serious economic crises in modern history. Companies have been obliged to reduce dividend payouts, major businesses have collapsed, even whole countries have wobbled and so it is little wonder that equity markets remain jittery. The BP oil leak and the political reaction are almost without precedent, driving volatility higher and fraying already worn nerves. Events of this magnitude drive investors to seek safety in the form of gold, the US Dollar and Government bonds. Whilst they may have been right in the short term, in the medium term we are increasingly confident that equity markets will regain their poise and investors will recognise some of the very attractive yields on offer at historically low multiples. With the fund paying close to 5% by way of a gross dividend yield, we think that this represents something of a bargain for those willing to look through the short term volatility and through to the resumption of corporate growth.

Momentum for investing into high quality companies paying sustainable dividend yields has been growing since the start of the year. Although January was a little shaky, markets have rebounded in February and March to date. Although we expect some profit taking either side of the Easter break, corporate earnings have been strong enough to justify current valuations and if economic growth continues to accelerate the market has scope for further short term appreciation. Whilst Dollar strength has helped Sterling returns, it is worth remembering that a significant part of earnings in both the UK and European components of the portfolio are generated outside of their domestic market. The Fund benefits, therefore, from the liquidity and accounting standards of the First World with a sprinkling of emerging markets growth which is contributing nicely to the bottom line of many companies in the Fund's portfolio. As at the start of March, the Fund was fully invested.

After a strong period of recovery in late 2009, it would be reasonable to expect some consolidation within the fund in 2010. However, those businesses which have led the market higher in recent months have often been those companies which were hardest hit by the credit crisis and whose weakened balance sheets prevent them from paying dividends which are the lifeblood of the fund. As a result, whilst the Fund fell in value in 2008, the falls were muted compared with large sections of the market.

Conversely, recovery was also a relatively modest affair set against the performance of certain sectors in 2009, notably financials and technology. This is to be expected in a fund of this nature where Marriott's income focused investing style seeks dependable growth and steady income streams rather than the cyclical boom and bust of riskier areas of the market. Marriott looks for businesses which can outperform through a variety of market cycles remaining focused on fundamental value, old fashioned cash flow and strong management teams, attributes which lead to medium and longer term performance in more difficult times as well as in periods of rising markets.