The fund returned -13.3 (in US dollar terms) for the quarter, against -16.5% from the benchmark MSCI World Index. For a rolling 12-month period, the fund's return of -5.9% is behind the benchmark's -3.8%. The quarter was characterised by some of the most extreme market volatility ever experienced. The European Sovereign credit crisis was again at the forefront of market concerns as a Greek default was widely anticipated and the contagion effect spread to other European states, especially Italy. Another seismic event was the downgrade of US government debt after a protracted negotiation over the extension of the US debt ceiling and this was the trigger for a mid-August selloff. A slowing of economic activity in Europe, the US and even China exacerbated an already nervous market. Sharp sell-offs were followed by large rebounds as markets were whipsawed by changing investor sentiment and daily newsflow. However, the overriding trend was downwards and equities and commodities sold off in a flight to safety for US collars and Japanese yen.

In terms of regional equity performance, Japan was the best performing region, falling only 6.4% (in US dollar terms), while Europe performed the worst, falling 22.6% (in US dollar terms). North America fell 14.5% while Asia ex-Japan declined by 19.7% (in US Dollar terms). The fund's regional positioning therefore had a negative impact on performance over the quarter. The underlying managers generated all of the relative outperformance this quarter, with a good spread of strong returns from individual funds and one or two minor disappointments. The largest contributor to relative outperformance was Cantillon Global Equity Fund which was particularly stable amidst the market turmoil and continued to outperform the market. Vulcan Value Partners, one of our US managers also had a very good quarter, generating 2.5% alpha over the S&P 500 Index.

In Europe, Adelphi European Select Fund finished ahead of the European markets, while Edinburgh Partners Europe was more or less in line with the indices. Morant Wright Japan also delivered good alpha in the Japanese markets. On the negative side, although the fund was in line with the Emerging Market indices, and amongst the best in its peer group, the Coronation Emerging Market Fund detracted from overall performance given the recent sell off in these markets and our overweight position in them.

Outlook
While fear continues to pervade the markets, it is likely that risk assets will remain out of favour in the short term. Europe is moving closer to a solution for Greece and other member states in financial trouble. The Fed and other central banks are committed to taking any steps necessary to provide market support and a further round of quantitative easing is possible. President Obama has announced a new job creation policy which is hoped will stimulate the economy and return it to a sustainable growth level. Despite all the negative newsflow, the fact remains that there are many high quality companies that will continue to grow and emerge from the crisis in an even stronger position than before, regardless of the short-term volatility of the their share prices. These are the companies that we and our managers seek to invest in and we view these levels as an attractive investment opportunity that will deliver attractive returns over the medium term.

Portfolio manager
Tony Gibson

The Coronation World Equity Fund of Funds returned -0.1% (in US dollar terms) for the quarter, compared to 0.7% from the benchmark MSCI World Index. For a rolling 12-month period, the fund's return of 19.1% is behind the benchmark's 31.2%.

The past quarter was dominated by the ongoing debt crisis in Europe, with Greece (again) at the centre. A tense standoff between Germany and the European Central Bank as to the best resolution for the Greek debt problem was compounded by an increasing resistance from the Greek electorate towards further 'austerity' cuts demanded by their neighbours, and consequently intense political wrangling by Greek politicians. More concerning however, is the political posturing in the US preventing an increase in the country's debt ceiling before 2 August, at which time the government estimates it will run out of funds. The current impasse is so deep that even the ratings agencies have warned that in order to prevent an outlook downgrade on US debt, a resolution needs to be found soon. Furthermore, despite promising data points earlier in the year, recent economic data is signaling a slowdown in the recovery in both the US and wider Europe, while even China's robust growth has eased slightly. These issues all contributed to a choppy market, which recovered strongly in the final week of the quarter on the apparent resolution of this round of Greek funding issues.

In terms of regional equity performance Europe was the best performing region rising 2.9% (in US dollar terms), while North America performed the worst falling 0.3% (in US dollar terms). Japan was marginally positive at 0.2%, while Asia declined by 0.2%. The fund's regional positioning therefore had a positive, albeit small, impact over the quarter. The managers had a mixed quarter, with the global and European funds detracting from performance, and the US and Japan funds finishing in line with the fund's performance. Cantillon struggled over the period as did all the European funds, all of which lagged the index over the three months.

During the quarter, we redeemed from Veritas Asia so as to reduce our exposure to that region and invested in the Veritas Global Equity Fund, which has a stellar long-term track record. Outlook Greece's debt issues (and the others in Europe) are resolved for now and in all likelihood the US debt ceiling will be raised before August and avert any major crisis. This will not, however, be the end of it and we would expect the sovereign debt crisis to rumble on for some time. Measures that need to be taken will act as a handbrake on growth and other factors such as credit and commodities will continue to drive volatility in markets. Equity markets continue to provide attractive investment opportunities especially in the larger, multinational companies that offer diversity, growth and high dividend yields. The investment liquidity of such stocks is another attraction to investors and, even if this might at some point be a negative, such times will provide our managers with a buying opportunity. Portfolio manager Tony Gibson The Coronation World Equity Fund of Funds returned -0.1% (in US dollar terms) for the quarter, compared to 0.7% from the benchmark MSCI World Index. For a rolling 12-month period, the fund's return of 19.1% is behind the benchmark's 31.2%. The past quarter was dominated by the ongoing debt crisis in Europe, with Greece (again) at the centre. A tense standoff between Germany and the European Central Bank as to the best resolution for the Greek debt problem was compounded by an increasing resistance from the Greek electorate towards further 'austerity' cuts demanded by their neighbours, and consequently intense political wrangling by Greek politicians. More concerning however, is the political posturing in the US preventing an increase in the country's debt ceiling before 2 August, at which time the government estimates it will run out of funds. The current impasse is so deep that even the ratings agencies have warned that in order to prevent an outlook downgrade on US debt, a resolution needs to be found soon. Furthermore, despite promising data points earlier in the year, recent economic data is signaling a slowdown in the recovery in both the US and wider Europe, while even China's robust growth has eased slightly. These issues all contributed to a choppy market, which recovered strongly in the final week of the quarter on the apparent resolution of this round of Greek funding issues.

In terms of regional equity performance Europe was the best performing region rising 2.9% (in US dollar terms), while North America performed the worst falling 0.3% (in US dollar terms). Japan was marginally positive at 0.2%, while Asia declined by 0.2%. The fund's regional positioning therefore had a positive, albeit small, impact over the quarter. The managers had a mixed quarter, with the global and European funds detracting from performance, and the US and Japan funds finishing in line with the fund's performance. Cantillon struggled over the period as did all the European funds, all of which lagged the index over the three months.

During the quarter, we redeemed from Veritas Asia so as to reduce our exposure to that region and invested in the Veritas Global Equity Fund, which has a stellar long-term track record.

Outlook
Greece's debt issues (and the others in Europe) are resolved for now and in all likelihood the US debt ceiling will be raised before August and avert any major crisis. This will not, however, be the end of it and we would expect the sovereign debt crisis to rumble on for some time. Measures that need to be taken will act as a handbrake on growth and other factors such as credit and commodities will continue to drive volatility in markets. Equity markets continue to provide attractive investment opportunities especially in the larger, multinational companies that offer diversity, growth and high dividend yields. The investment liquidity of such stocks is another attraction to investors and, even if this might at some point be a negative, such times will provide our managers with a buying opportunity.

Portfolio manager
Tony Gibson

The fund returned 1.7% (in US dollar terms) for the quarter, against 4.9% from the benchmark MSCI World Index. For a rolling 12-month period, the fund's return of 8.4% is behind the benchmark's 14.0%.

It has been an eventful quarter, starting with the floods in Australia and ending with the UN military intervention in Libya. Despite the myriad of unsettling events, the world economies seem to be gathering strength, building momentum from a number of positive headline figures. Markets rose strongly into 2011 on the back of improving economic situation, but the tragic events in Japan and unfolding political change in North Africa and the Middle East caused a sharp market downturn in mid-March, only to recover by month-end. Energy and food prices have also risen sharply, creating unwelcome inflation pressures. At this time, only the ECB seems intent on raising rates in the near future, while the US Federal Reserve and BOE are more concerned about higher interest rates derailing the recovery than transitory inflation that could ease in the months ahead. Indeed, while peripheral Europe remains mired in debt, many believe that the ECB may be about to make a major policy mistake by raising rates too early.

In terms of regional equity performance, Japan was the worst performing region, falling 4.9% (in US dollar terms), while Europe performed best, rising 6.6% (in US dollar terms). North America was also strong, finishing up 6.1% while Asia ex-Japan rose 2.8%. The fund's regional positioning was a significant detractor from performance over the quarter.

Overall, the performance from our underlying managers was also the core reason for this quarters' underperformance.

Contrarius Global underperformed due to an overweight exposure to Japan prior to the earthquake and subsequent tsunami. These tragic events and the aftermath have shown how resilient the Japanese are and while there will be supply chain disruptions and a period of economic contraction; the correction was probably overdone and this could be a catalyst to reignite a flailing economy. Morant Wright Japan mostly hold companies with domestic exposure which would explain that fund's quarterly underperformance.

Cantillon Global Equity was affected by a strong rotation out of quality stocks into more risky financials and energy in January and February and a strong recovery in March was not enough to offset the losses in the first two months.

On a positive note, Edinburgh Partners European had a good quarter driven largely by its exposure to industrials and energy stocks. Ruffer European lagged the positive markets as it is prone to do with its defensive positioning. We have been looking at ways to improve the fund's performance and will be making a number of manager changes during the next few weeks which we look forward to discussing in our next review.

Outlook
We see monetary policy as critical to global economic growth and despite the strengthening in the recovery, we believe it is too early for policy makers to risk raising rates just yet. Although increasing inflation is creating pressure and the various Central Banks are actively discussing doing so, we suspect that that they hope their rhetoric will be enough to tame the current pressures. As budget cuts take effect in the UK and Europe and the US debates their budget requirements, there is potential for unexpected shocks to derail the recovery. We expect this to remain as the foremost concern for policy makers, therefore keeping rates low and an environment distinctly biased towards equities.

Portfolio manager
Tony Gibson

The fund returned 1.6% for the quarter, against 3.8% from the benchmark MSCI World Index (dividends reinvested). For a rolling 12-month period, the fund's return of -1.8% is behind that of the benchmark's +0.5%.

Equity markets rose strongly in the fourth quarter despite a re-emergence of the sovereign debt crisis in Europe as Ireland was forced to accept a European/IMF bailout and implement further budget cuts. As with Greece, contagion was a concern and Portugal and Spain were forced to strongly deny any need for similar measures. We expect these countries will endure deep recessions but are cognisant that other parts of Europe are showing signs of a slow, steady recovery which should prevent default of any one country. In the US, markets reacted favorably to ongoing improvement in the local economy, overlooking the political 'shellacking' of President Obama and continued weakness in employment numbers. Despite the economic improvement and widespread criticism of the second round of quantitative easing, Fed Chairman Bernanke spoke openly about his willingness to further expand this quantitative easing by launching 'QE3' should it be required. This announcement also buoyed the markets. China, on the other hand, continued to try to moderate its strong economic growth and rampant housing market by raising Bank reserve requirements during the quarter.

In terms of regional equity performance, Japan was the best performing region, rising 12.1% (in US dollar terms), while Europe was the worst performer at only 4.6% (in US dollar terms). North America had a strong quarter finishing up 11.1% (in US dollar terms) compared to the MSCI World Index return of 9.1%. The fund's regional positioning was the largest detractor from relative performance this quarter.

Overall, the managers only slightly detracted from relative performance, with Asia and the US underperforming and Europe and Japan outperforming their respective benchmarks. In the US, despite an excellent annual return, Vanguard Primecap underperformed this quarter as did Legg Mason Value Fund. UOB Kinetics were marginally behind the index and also had a strong 12-month performance. Veritas Asia had a poor quarter and was the main reason for the Asian underperformance. The manager has been very cautiously positioned in the latter half of the year and has consequently lost ground with the strong momentum in the markets. Vitruvius Asia performed in line with the index.

In Europe, the market stress experienced during the year has created some excellent investment opportunities and Egerton Capital European fund, in particular, capitalised on these to have an excellent performance for the quarter and the year. Although defensively positioned, Ruffer European also contributed to performance this quarter. In Japan, Morant Wright had a good quarter, finishing the year slightly behind the Topix index.

During the quarter, we made an initial investment into Vulcan Value Partners Fund, run by CT Fitzpatrick and his team based in Birmingham, Alabama. Mr. Fitzpatrick was previously a portfolio manager with Southeastern Asset Management before founding Vulcan Value Partners. A strong emphasis on quality companies, detailed proprietary research and a concentrated portfolio are the key strengths we liked about the firm and are pleased to have them manage a part of our portfolio.

We also invested in Indus Select, a Pan-Asia fund. We already have exposure to the manager of this fund through our investment in the Vitruvius Asia Fund. We will ultimately consolidate our investments into the Indus Fund.

Outlook
We have been saying for some time that we believe that equities are under-owned and offer attractive valuations over the medium term. 2010 was a difficult year for stock pickers but we believe that the markets will again focus on company fundamentals as the broader economic environment becomes clearer and more stable. Equities are also an effective inflation hedge which further enhances their attractiveness should, as we expect, inflation start picking up.

Portfolio manager Tony Gibson