Inflation-linked bonds gave up some of their recent gains during the month of July. Some speculative selling coupled with the lure of superior expected returns in other asset classes saw real yields being driven higher over this period. The fund reduced its weighting to inflation-linkers and will maintain this underweight position in the near term. Nominal bonds managed to deliver a positive return of 1.00% over the month. This was largely driven by the stability in the local currency and better than expected inflation data being released to the market. The fund continues to hold an underweight position in nominal bonds. Historical valuations of these instruments remain expensive delaying further participation in the short term. The South African equity market powered ahead in July 2005, generating a return of 7.17% and reaching successive new highs. All sectors experienced positive returns, except for gold and paper stocks with negative returns of 5.2% and 7.9% respectively. The star performers were the bank and retail sectors, which staged a strong rally after lagging the market for the last six months. The rand strengthened marginally during July and this led to a less than stellar (albeit positive) performance for rand-hedge stocks. The equity portion of the fund continues to meet it's objective of beating inflation over the medium term. In equities, the combination of bullishness and high valuation has meant that the risk of losing money has increased. We are finding fewer opportunities that meet our stringent selection criteria and accordingly the equity percentage of your fund remains at below average levels. We will continue to exercise patience and wait for more lucrative opportunities to arise in the future. An overweight position in cash was maintained for the month of July. Active participation in this asset class will be maintained in the near term. 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.

As anticipated, the latest inflation measures have shown an up turn in headline inflation. As a primary hedge against inflation, inflation-linked bonds have benefited from this move delivering in excess of 0.80% performance for the month. The fund has maintained an overweight position in these instruments to take full advantage of this. Returns in the bond market were largely fuelled by the surprise rate cut of 0.50% delivered by the South African Reserve Bank in the second week of the month. Bond yields that initially weakened at the start of the month dropped sharply causing bonds to produce performance in excess of 2% over the period. The fund had, however, already reduced its exposure to nominal bonds in line with our view of rising interest rates in the near term. We will continue to hold a minimal weighting to nominal bonds in the near term in line with our view. An overweight position in cash was maintained for the greater part of the month. Further active participation in this asset class will be maintained in the near term. The South African equity market experienced a strong pullback in April 2005, posting a negative return of 5.2% (it's worst monthly decline since March 2003). Resource stocks led way with a negative return of 8.7%. The sell off in resource stocks was mainly due to the strong domestic currency (despite a 50 basis point interest rate cut in mid-April) and renewed investor fears of a weaker US dollar. Despite this pullback, the equity portion of the fund continues to meet its objective of beating inflation over the medium term. We remain very cautious. It is true that historical returns from equities have proven to be a phenomenal hedge against inflation (provided the initial price paid was low). The ALSI is currently at the top end of it's historical valuation range and investors are extremely bullish. This combination of bullishness and high valuation has meant that the risk of losing money has increased. We are finding fewer opportunities that meet our stringent selection criteria and accordingly the equity percentage of your fund remains at below average levels. We will exercise patience and wait for such lucrative 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.

Returns from Inflation-linked bonds were small this month as the lagged effect of lower headline inflation filtered through to the performance of these instruments. The fund reduced its position in inflation-linkers to accommodate the slow down in performance during the month. An overweight position relative to the benchmark will however be maintained as an up turn in lagged inflation is anticipated in the coming months.

Nominal bonds experienced their worst monthly performance in more than two years with the All Bond Index delivering -3.67% for the month. The fund initially held nominal bonds close to benchmark levels but this position has been substantially reduced as we anticipate further weakness to dominate the local bond market in the near term. The weakness in the bond market has been driven by a weaker currency, less favourable performance in emerging markets and a weaker backdrop to global bond yields.

Cash holdings have been increased with more active participation in money market instruments. Besides inflation-linked bonds, the money market will be one of the preferred asset classes in the very near- term.The S.A. economy continues to power ahead, buoyed by the low interest rates and reduction in inflation. Business confidence is close to all time highs and the consumer in particular is showing increasing willingness to take on more debt as a result of the "wealth effect" created by the strong surge in equity and property prices over the last 24 months.

The ALSI has recently reached a series of all-time highs and understandably, investors are extremely bullish. The ALSI remains at the top end of its historical valuation range and while this is normally a bearish signal for equities, it does not imply that the market will decline in the very near future. The unfortunate result of the recent run up in share prices is a decline in the number of attractive opportunities to deploy capital. 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.

Inflation-linked bonds performed well during the month of February delivering in excess of 0.80%. Government auctions in the longer dated inflation-linkers also contributed to a drop in real yields thus augmenting the performance of these instruments. The fund increased its weighting to inflation-linkers in order to derive maximum benefit from the positive returns generated during the month.

Bond yields continued their decline spurred on by a strong currency, stable economic fundamentals and a financial budget that was mildly positive for bond returns. The All Bond Index returned 1.99% for the month of February. For most of the month the fund held a position close to benchmark levels. Cash holdings were held at optimum levels ensuring sufficient liquidity in the fund.

The S.A. economy continues to power ahead, buoyed by the low interest rates and reduction in inflation. Business and consumer confidence is close to all time highs. The consumer in particular is showing increasing willingness to take on more debt as a result of the "wealth effect" created by the strong surge in equity and property prices over the last 24 months.

The ALSI continues to hit all-time highs and understandably, investors are extremely bullish. The ALSI remains at the top end of its historical valuation range and while this is normally a bearish signal for equities, it does not imply that the market will decline in the very near future. The unfortunate result of the recent run up in share prices is a decline in the number of attractive opportunities to deploy capital.

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

January saw Inflation-linked bonds yield one of their best performances in the last twelve months. Real yields were driven down approximately 10 basis points due to increased investor demand for this asset class. Demand was largely driven by the stretched valuation position in nominal bonds. The Fund maintained an overweight position in these instruments to take advantage of the move.

Local bonds once again posted a relatively strong performance for the month of January. Driven by favourable economic fundamentals and an imminent up-weighting of the All Bond Index, bonds retuned 1.45% for the month. Bond exposure was held close to benchmark levels in order to participate in the positive return.

The Fund had an overweight position in cash for the greater part of the month. This position will be maintained in the short term.

The South African equity market continued where it left off in 2004, with a return of 1.35% in January 2005. Financial and industrial stocks under-performed the market, while resource stocks outperformed the market with a positive return of 4.21%. The out-performance of resource stocks is mainly due to the weaker domestic currency and oversold nature of the underlying stocks. The equity portion of the Fund enjoyed strong absolute performance for the month. Most importantly, your equities are meeting their objective of beating inflation over the medium term.

We remain very cautious. The continued surge 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 investors are extremely bullish. We are finding fewer opportunities that meet our stringent selection criteria and accordingly the equity percentage of your fund remains 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.

Real yields were steady for the month of December. As expected, inflation linked bonds yielded a return in line with the lagged effect of inflation embedded within these instruments. Headline inflation is expected to increase from its low base in the coming months. The fund will look to increase its inflation linked bond exposure to take advantage of this.

Bond returns for the month of December were once again positive. A stronger currency, controlled inflation and a decline in global bond yields 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 be benchmark levels.

Equity portion
The South African equity market continued it's strong run in December with a return of 1.44%. Financial and Industrial stocks outperformed the market handsomely, while Resource stocks posted a negative return of 3.99%. The underperformance of Resource stocks is mainly due to the strong domestic currency and investor fears regarding continued weakness in the US dollar. The equity portion of your fund enjoyed strong absolute and relative performance for the month. The main reason being our high exposure to Industrial and Financial stocks. Most importantly, your equities are meeting their objective of beating inflation over the medium term. We remain very cautious. The continued surge 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 investors are extremely bullish. We are finding fewer opportunities that meet our stringent selection criteria and accordingly the equity percentage of your fund remains 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 obj its inception. Performance objectives are being maintained through tactical allocati asset classes helping the fund to perform well against its defined benchmark.