The portfolio declined by 1.7%. The rand weakened by 5.39% and as such offset some of the MSCI dollar losses and added to the SBWGBI gains. The International Bond Fund is the largest holding making up 30.58% of the portfolio. Unfortunately it underperformed its benchmark and detracted from relative returns - although it was positive for the quarter. The America Fund, our largest equity holding which makes up 21.92% of the off-shore portfolio, contributed to relative performance as it outperformed its benchmark. It concentrates on large capitalization stocks that outperformed the small caps. For the quarter large caps (S&P 500) fell 15.83% compared to the small cap Russell 2000 that fell 19.09%.

The largest equity holding in the portfolio, Microsoft, detracted from performance (down 20% - 3rd Qtr % change). General Electric (-15.1%), Coca-Cola (-14%), Phillip Morris (-11.2%), and Johnson & Johnson (+3.5%) were all in the top 10 largest equity holdings, and contributed to relative performance. The American Growth Fund is the third largest holding and also contributed to returns as it declined almost 2% less than the S&P 500. The Euro Blue Chip Fund declined by 24.77%, slightly better than the aforementioned European indices and therefore also contributed to relative performance. The Japan Fund is the fifth largest holding and makes up 4.60% of t he offshore portfolio. It also outperformed its benchmark (-9.77% vs. -11.44%), as did the European Growth Fund, our fourth largest holding (-20.28% vs. 23.51%).

The G7 leading economic indicator is pointing to a global recovery. Moreover, the recovery appears synchronised among the three major economies, namely the Euro Area, the US and even Japan! Global industrial production has clearly improved and is in a recovery phase. There is little evidence of inflation risk, however event risk continues to undermine the positive economic fundamentals.

The aforementioned economic environment is one that should benefit equities at the expense of bonds. Unfortunately a series of revelations about overstated profits and revenues at some of the largest US firms, such as Enron and WorldCom, eave question marks about the true health of corporate America. This resulted in bonds outperforming equities over the quarter. The portfolio ended the quarter down 8.66%, outperforming its benchmark due to a larger cash holding.

The best performing equity fund in the portfolio was the Japan Fund. It was up 9.08%in dollars largely due to a strengthening Yen as well as positive GDP and industrial production numbers that boosted the equity market. The Sterling Bond Fund also contributed to returns by rising 7.96%in dollars while the biggest holding, the International Bond Fund was up 10.48%.It did however detract from relative returns by underperforming its own benchmark due to the fact that it has corporate bond exposure and corporate bonds underperformed government bonds because of the loss of confidence in the corporate arena. Its interesting to note that it was actually negative in euros over the same period (-1.7%) because of the 12.63%increase in the euro versus the dollar.

There are concerns over US corporate earnings and the lack of pricing power, which could limit the recovery in profits. The above is probably already reflected in equity prices and as such the fund managers will look at phasing into equities to be in line with the fund benchmark.

The dollar and euro lost 5.11% and 7.13% respectively against the local currency. Global bonds, which make up 34.67% of the portfolio, declined by 6.02% in rand terms as measured by the Salomon Bros WGBI during the first quarter. Equities also declined with the MSCI World Index losing 4.92%. The euro and sterling lost 2.11% and 2.03% respectively against the dollar as it benefited from positive economic data releases such as lower unemployment, as well as increases in consumer confidence and manufacturing. Indonesia and South Korea were the best performing markets up 35.88% and 28.72% respectively - in dollars! Germany 's Xetra Dax was up 2.04%, while the S&P 500 and FTSE 100 lost 0.06% and 0,88% respectively. The Nikkei slumped to an 18 year low in February but rebounded by more than 26% to end the quarter up 1.14%

Fund Performance
The stronger rand resulted in the fund declining over the quarter. The South East Asia Fund was the best performing component of the portfolio rising 15.31%in dollar terms. Good asset allocation and stockpicking within the underlying fund contributed to returns. The Japan Fund also performed well thanks largely to good stockpicking. NTT Docomo, Nissan and Sony, three of the subportfolios top 10 holdings were all up in excess of 30% since early February. These shares have also almost doubled since September 11 and were also in the top 10 during the fourth quarter of 2001. The largest equity holding is still the America Fund. It concentrates on large capitalization stocks where performance was mixed. General Electric (-6.6%, 1st Qtr % change), and Microsoft (-9.0%) were two of the poorer performing stocks in the subportfolio while Wal-Mart was up 6.5%.

Fund Positioning
The fund is relatively neutral versus the benchmark as far as asset allocation goes. It is also slightly underweight in bonds. This slight underweight position is a result of the better than expected economic numbers coming out of the US and will continue during the second quarter.