the quarterly period to March 31, continued to feel the effects of a depressed market.

The fund's quarterly update reported that exclusive of dividends, the NAV decreased from $9.97 to $9.86 over the three-month period. And the fund paid a dividend of $0.08 per share. The total return for the period was -0.8 percent.

For the first full year of operations, since its launch on March 31, 1994, the fund's return has been 1.8 percent, inclusive of dividends. Butterfield Management Company Ltd. describes that as "a good result given the very poor performance of the Bermuda market as a whole.'' The index, exclusive of dividends, declined by 8.7 percent for the year, while the fund, exclusive of dividends, declined 1.4 percent.

The shareholders' letter said the reason the fund has performed better than the market is because it has maintained a large allocation toward cash and money market securities, helping to offset the general decline in the market value of the principle equity holdings.

The fund has also been able to capture trading profits by taking advantage of the volatility in the market.

The company reported their view that uncertainty caused by the Independence debate is one of the principal causes of the poor performance of the market at this time.

"Investors,'' they say, "are sitting on the sidelines, waiting to see what happens with the Independence referendum, and are investing their savings in the safety of deposits.

"The key to the rebound of the market will depend on the collective confidence of local investors which is difficult to predict with any real degree of accuracy.

"When investors finally decide to get back into the market, there could well be a sudden jump in the index and those who wait patiently will, in our opinion, be rewarded for taking the risks.'' That is the reasoning behind the decision to increase the equity content of the fund's portfolio "as the market weakens and whenever the trading opportunities are attractive.'' The company feels that the local equity market valuations are attractive given a long term focus, but said there still appears to be some structural difficulties in the valuation of the fixed income securities, which are overvalued when viewed against comparative US dollar securities.

It is because of this, that the fund's strategy has been to maintain a low weighting toward bonds, and to limit holdings to US dollar issues.