By Forsyth Partners Limited

We feature a series of model portfolios with the intention of providing practical guidance for readers. It is updated and published quarterly.

The core portfolios are Global Equities, Global Bonds and Global Emerging Markets. In each of these we show the ‘FP Model Portfolios’ compared with major benchmark indices and an average of the positions of the leading fund managers.

Whilst we indicate specific percentage weightings, these should be used as broad guides and readers may wish to manage portfolios in a practical sense by considering exposure in terms of "ranges".

We divide the world into two broad groupings:

• Developed Markets include North America, Japan, Continental Europe and the UK
• Emerging Markets are featured on a regional basis to include South East Asia, Latin America and Emerging Europe, Africa & Middle East.

We also specify a number of portfolio variations based upon the core portfolios noted above. These include a series of Balanced Portfolios, a Positive Growth Portfolio and Currency Tilted Portfolios for Sterling, US Dollar and European investors who wish to retain a heavy proportion of their assets in their base currency. These portfolios are described from pure equity and balanced portfolio perspectives.

Last but not least we also feature performance information showing the results achieved. Please note, however, that the performance information is usually updated 1 month after release/publication of the asset allocation models.

GLOBAL EQUITY PORTFOLIO

Comment:

This month we have made some modest changes to the FP Model weightings. Within the developed markets element of the Model, we continue to recommend a 42.5% exposure to North America. The European markets have performed well and we remain attracted by the long term prospects. We are increasing the weighting to 32.5%. We are reducing UK exposure slightly and cutting emerging market exposure, by eliminating Asia, in order to reintroduce a commitment to Japan.

Over previous quarters we had gradually cut the Japanese weighting to zero. We believe that, at this point, it is too risky to have no commitment to that market and we have decided to reintroduce a weighting at the 5% level. The short term outlook may be uncertain but it does seem that Japan is being forced to restructure and it may well be that the market moves ahead in advance of any results of restructuring being reflected in corporate earnings. In addition, there does seem to be evidence that the global establishment does not wish to see the Yen weaken further both because of the impact domestically and because of the negative effects of a follow through into South East Asia.

GLOBAL BOND PORTFOLIO

Comment:

In Europe, we have decided to maintain our below average weighting. The consensus shows a decline on the grounds that convergence has already occurred. Last time we boosted the emerging market weighting. This class has had a difficult quarter but we are maintaining our stance on the grounds that spreads look attractive although the risks are still present.

GLOBAL EMERGING MARKETS PORTFOLIO

Our asset allocation stance does seem to be particularly aggressive with Latin America and Emerging Europe being equally weighted. It may be that readers would prefer to hold some cash in an emerging markets portfolio but our methodology dictates that we always show a fully invested position.

BALANCED PORTFOLIOS

Comment:

The figures show Q2 1998 weightings in parenthesis.

POSITIVE EQUITY GROWTH PORTFOLIO

Comment:

The figures show Q2 1998 weightings in parenthesis.

CURRENCY TILTED PORTFOLIOS

Comment:

We are showing in parenthesis the figures for Q2 1998.

PERFORMANCE REVIEW

This Performance Review for the Period Up to 31^st March 1998

1. All figures calculated in US Dollars on a bid to bid basis with gross income reinvested.
2. Indices used are MSCI World, Salomon World Government Bond and MSCI Emerging World Index.
3. Performance data extracted for Hindsight; other calculations prepared by Forsyth Partners.
4. Figures calculated 1^st January 1998 to 31^st March 1998.
5. FP Model performance calculations are based on funds recommended for the first three months of 1998 on an equally weighted basis on specific recommendations by market as featured in this Asset Allocation Review.
6. Index performance calculations are based on: (i) in the case of equities, MSCI weightings adjusted for the performance of the domestic MSCI Index in the relevant market and (ii) in the case of bonds, Salomon World Government Bond Index performance.
7. Average Manager performance calculations are based on the Average Manager weightings at the beginning of each quarter, with the appropriate domestic MSCI or Salomon World Government Bond Index movement applied to these weightings.

This document is issued by Forsyth Partners Limited, which is regulated in the conduct of investment business by IMRO. This extract from their research should be read in conjunction with the Methodology and Background Notes Module which forms part of the Research Manual which is published by Forsyth Partners Limited and is available on subscription and, in particular, attention is drawn to the emerging market risks warnings contained therein. The price of shares/units and the income from them can fall as well as rise and the value of an investment can vary upwards or downwards depending on exchange rate movements. © Forsyth Partners Limited – FORSYTH PARTNERS LTD, 18 BARCLAY ROAD, CROYDON, CRO 1JN UK.

Tel: +44 181 649 9440/Fax: + 44 181 649 9441