year to June 30 blames the stock market for the decline in the net asset value per share, which dropped 2.4 percent or $0.24 to $9.93 from $10.17 in the twelve month period.

The fund at the end of the financial year had assets totalling $13,553,015, with $13,394,201 in net assets available to shareholders, compared with $11,793,724 the year before.

And in this, the first full year of reporting, the fund paid out $175,815 in expenses -- including $90,307 in management fees -- and netted investment income of $499,106.

The management agreement calls for the manager to receive a monthly fee calculated at no more than one percent per annum of the average valuation of the net assets of the fund carried out on the valuation days during each month.

Presently, the monthly fee is calculated at the rate of 0.75 percent per annum. The fee of the manager is reduced to take account of the management fee already levied on assets held in shares of other funds managed by the manager.

The report to shareholders from Buttress Bermuda Fund president, The Hon. Sir David Gibbons, the chairman of the Bank of N.T. Butterfield & Sons Ltd., said that the fund's investment adviser, Butterfield Asset Management Ltd., believes "the principal cause of the poor performance of the Bermuda market is the uncertainty caused by the independence debate''.

The report continues: "This has led to significant declines in stocks which the adviser believes have sound long term potential for price appreciation.

The fund held approximately 59 percent of net assets in equities at June 30th 1994.

"This allocation has been steadily increased to 70 percent as the market weakened. It is the intention of the adviser to continue building the equity component while the market appears undervalued.'' As an overview, Sir David noted that the Bermuda market's softness has not reflected the profits being experienced by leading companies.

The Bank of Bermuda and the Bank of Butterfield both had record profits and the Bermuda Commercial Bank recorded its first sound bottom line in years. The Bermuda Electric Light Company Ltd. had record revenues, the Bermuda Telephone Company had record profits. Even in the insurance sector, there was evidence of sound profitability.

The bank chairman said: "Economic data indicates that the country has stable financial prospects. Inflation is steady around 2.4 percent, slightly below US levels, tourism spending is up over the prior year, and growth in new international company formation is strong, although the retail sector's continued weakness has had an impact on companies that rely on local consumer spending.

"As an indication of the strength of the local economy, Bermuda's credit rating has been recently reviewed and given a strong designation of AA by Standard & Poors.'' The AGM for the Buttress Bermuda Fund Ltd. has been set for October 24 at the Bank of Butterfield's Rosebank Centre.

Leading the equity component of the assets by value were the 161,905 shares of the Bank of Bermuda, valued June 30 at $2,914,290, or $341,062 less than they were bought for. They are followed by 221,083 Bank of Butterfield stock, valued at $2,708,265 or $117,666 less than was paid for them. The only other $2 million-plus block of shares was the 107,462 BELCO stock, with a June 30 market value of $2,189,538, some $33,933 more than the stock was purchased for.

The fund paid dividends for the year of $0.32 per share and total return for the period was 0.8 percent, compared to the 10.4 percent slump on the Bermuda Stock Exchange index, which fell to 1,029 from 1,149. The fund's conservative asset mix was said to be the overriding factor that kept its performance better than the index.

The index itself is heavily weighted in the large bank stocks, which represent approximately 65 percent of the total market capitalisation. The fund started the year with 30 percent of net assets held in these securities. During the year, these stocks fell between 10 and 20 percent in price, and the fund bought into those declines to raise the bank stock allocation to 45 percent.

The utility sector is the second largest in the index, representing about 15 percent. The insurance sector is next with eight percent, equal to that of the fund itself, until the end of the year when it was reduced to five percent due to the increase in risks of the sector.

The fund began the year with a 21 percent allocation to the utility sector, although it was reduced to 16 percent for the end of the year. The utility investments proved to be a stabilising influence for the fund throughout the year.

The remainder of the equity component of the fund is invested in new public companies and various smaller issues, the largest of which is 60,516 shares in Argus Insurance Company, purchased for $608,342 and valued at June 30 at $650,547.

There were two fixed income securities in which the fund was involved by the end of the financial year, comprising nearly 12 percent of its net assets.

They included a million shares of Bermuda Gov't Bond 7.5 % Senior 6/2004, bought for $1,001,000 and later valued at $1,060,600. And 523,000 shares of Bank of Bermuda 9% Capital Notes 10/2001 were purchased for $553,629 and later valued at $536,075.

The total investment package for fixed income and equity securities cost $11,243,362 and on June 30 were valued at $10,935,206.

Cash and cash equivalent assets included more than $2.4 million, and there were other assets less liabilities of just under $40,000.