Real yields once again held steady during the month of November. As predicted, the lagged effect of inflation embedded in inflation-linked bonds slowed down performance for this asset class. Returns however were still positive and well in line with current inflation trends. The fund will hold a reduced weighting in inflation-linked bonds for the near- term. This position will be revised once the expected pick up in inflation filters through to these instruments.

Bond returns for the month of November were once again positive with the All Bond Index returning 2.25% for the period. A stronger currency together with an expectation of a further rate cut in the coming months has lead to the strong performance of nominal yields over the period. The fund increased its weighting in nominal bonds during the course of the month in order to take advantage of this move.

The cash position in the fund has been held at optimum liquidity levels currently being close to benchmark levels.

November 2004 proved to be a phenomenal month for S.A. equities as the ALSI posted a return of 7.26%. The surge was driven by Financial and Industrials, with Resource stocks being held back by the strong domestic currency. The equity portion of the fund enjoyed strong absolute performance for the month and surprisingly performed in line with the market. The main reason being our high exposure to Industrial and Financial stocks. Most importantly, equities are meeting their objective by beating inflation over the medium term. We remain cautious. The recent upward moves in equities, while pleasant, has meant that the risk of losing money has increased.

The ALSI is currently at the top end of it's historical valuation range and investor appetite for equities is similarly high. S.A. equities are currently fairly priced and it would be foolhardy to extrapolate the recent market performance into the future. We are finding less opportunities that meet our stringent selection criteria and accordingly the equity percentage of your fund is at below average levels. We will exercise patience and wait for such opportunities to arise in the future.

The fund continues to deliver inflation beating performance and has exceeded this objective since its inception. Performance objectives are being maintained through tactical allocation between asset classes helping the fund to perform well against its defined benchmark.

Demand for inflation-linked investments continued to grow during the month of September. Real yields firmed which helped inflation-linked bonds to show their best monthly return for the past 3-month period. The continued downtrend in inflation was confirmed by the publication of the latest inflation statistics. Sufficient demand for inflation-linkers still exists as investors embrace the long-term benefit of this asset class. The fund retained its weighting of inflation-linked bonds at benchmark levels to capture the positive returns generated for the month. Nominal bonds once again produced a positive return for the month supported by declining inflation. We are however wary of the weaker global interest rate environment which may have a negative bearing on our local yields in the short term. In addition the local Monetary Policy Committee meets this month and their actions with regard to interest rates will have a strong bearing on the direction of bond yields in the near-term. The fund held a position close to benchmark weight to take advantage of the decline in nominal yields this month. A cautious stance has been adopted for the coming month as we survey and analyse the next move in rates. The fund continues to hold an overweight position in cash exposure relative to benchmark levels. The surge in S.A. equities continued in September as the ALSI posted a return of 5.71% for the month. Bank stocks led the way as the potential bid for ABSA (by Barclays) acted as a positive catalyst in unlocking the value trapped in the sector. The equity portion of the fund enjoyed strong positive performance for the month, performing in line with the market. Most importantly, equities are meeting their objective of beating inflation over the medium term. A word of caution is deemed appropriate at this time. The ALSI is currently at an all time high and investor appetite for equities is similarly high. S.A. equities are currently fairly priced and it would be foolhardy to extrapolate the recent market performance into the future. We are finding fewer opportunities that meet our stringent selection criteria and the equity percentage of the fund is at below average levels. We will exercise patience and wait for such opportunities to arise in the future. The fund continues to deliver inflation-beating performance and has exceeded this objective since its inception. Performance objectives are being maintained through tactical allocation between asset classes helping the fund to perform well against its benchmark.

Real yields declined marginally during the month of August in anticipation of rising inflation later this year. Inflation fears in the near term were however allayed when the inflation index published for the month of July indicated a rate of increase below that of market expectations. Despite this, demand for inflation-linked bonds was sufficient to hold real yields steady for the remainder of the month. The fund retained its weighting of inflation linked bonds at benchmark levels to capture the positive returns generated for the month. Nominal bonds had a strong showing during the month of August. The decline in nominal yields was mainly fuelled by the surprise cut in interest rates and lower inflation expectations in the near-term. The exposure to nominal bonds was raised to benchmark levels to take advantage of the returns generated. We remain wary of the threat of higher oil prices and the rise in global interest rates. The position in bonds will be reviewed should these factors pose a threat to the bond market. The fund continues to hold an overweight position in cash exposure relative to benchmark levels. S.A. equities surged 8.75% in August on the back of an interest rate cut and a significantly weaker rand. The equity portion of your fund enjoyed strong positive performance for the month, albeit way behind the excellent performance of the All Share. Most importantly, your equities are meeting their objective of beating inflation over the medium term. A word of caution is deemed appropriate at this time. S.A. equities are currently fairly priced and it would be foolhardy to extrapolate the recent market performance into the future. We are finding fewer opportunities that meet our stringent selection criteria and accordingly the equity percentage of your fund is below benchmark levels. We will exercise patience and wait for such opportunities to arise in the future. The fund continues to deliver inflation beating performance and has exceeded this objective since its inception. Performance objectives are being maintained through tactical allocation between asset classes helping the fund to perform well against its benchmark and its peers.

Demand for inflation-linked bonds continued throughout the month of April causing real yields to decline by as much as 20 basis points over the period. This has once again lead to inflation-linked bonds being one of the better performing asset classes for the month. Even though inflation figures released this month were lower than expected, the general trend in inflation is showing signs of increasing, which will benefit inflation-linked bonds in the near- term. The fund will thus retain an overweight position in this asset class. As anticipated, nominal bonds showed negative returns for the month. This was largely due to a combination of factors, which included expectations of an increase in inflation, Rand volatility and bonds being less of a preferred asset class. Bond exposure in the fund has been retained below benchmark level. The fund continues to hold an overweight position in cash exposure relative to benchmark levels. The equity market, as measured by the All Share Index, declined during April as resource stock valuations adjusted to declining dollar commodity prices and reduced demand from China. The equities in your portfolio have held up well in the face of the general market decline mainly duet their strong defensive characteristics. Our objective, as long-term investors, is to purchase equities where the risk of permanently losing capital is low. The fund continues to deliver inflation beating performance and has exceeded its objective since inception.