The rise in global markets continued though September, with the MSCI World Index reaching a new high for the year, before retracing marginally toward month end. In developed markets, the feeling appears to be unanimous that the end of the recession has been reached. Views as to the extent of the recovery, however, remain diverse, from Nouriel Roubini's potential "double-dip" view on the one hand to the extremely enthusiastic Barclays Capital view on the other hand. The eventual outcome will be somewhere between these two extremes, with a slower-than-usual recovery probably the most likely scenario. The concern currently being contemplated in the market is that share prices have possibly anticipated too optimistic an outcome.

Bond yields remained volatile during the month, declining in the USA, but mixed in other regions, with no real trend being evident.

While it is believed that the defensive bias of the fund remains appropriate, this has led to underperformance of the peer group in the short term. Economic data and developments continue to be closely monitored as we constantly re-evaluate our positioning.

After the extremely strong rebound seen in stocks since 9 March 2009, world markets took a breather in June, with most markets retreating from the highs of the month to end slightly lower than the starting level for the month. While economic data has remained mixed, the fact that the rate of decline in a number of variables has been slowing has been seen in a positive light by the market. Market volatility, as encapsulated by the VIX Index, has also indicated that market participants have been more willing to embrace risk than was the case earlier in the year, which has led to strong performance from emerging markets. On-the-ground evidence has been mixed too, with some corporates giving guidance better than expected and others down-scaling their guidance. It does seem however, that the worst of the recession is behind us, but the timing and extent of the recovery is still very uncertain.

Bond yields, which rose sharply from their lows, have retraced somewhat, reflecting the uncertainty referred to above.

In the current climate, the defensive bias of the fund is considered to be appropriate.

Stock markets rebounded strongly in March, as data indicating a slowdown in the rate of decline in economic fundamentals led investors and administrators alike to believe that the worst of the current recessionary environment is behind us. What does remain a point of dispute, however, is how far off a recovery is likely to be. Despite this optimism, bond rates continued to decline during the month, particularly in the US and the UK. Currencies, too, were volatile as the Dollar, after a protracted period of strength, lost ground against Sterling and the Euro. The Rand performed strongly over the month, outperforming all of the above-mentioned currencies.

Management of the Fund was transferred to ABSA Asset Management during the month. Going forward, it can be expected that the orientation of the Fund will lean more toward large capitalisation stocks than is currently the case. Companies with prudent balance sheets, experienced management, and strong product lines are those most likely survive the current downturn and even emerge in better shape. The sound principles exercised by the previous manager will nonetheless be retained.

December experienced a continuation of the recovery in global equity markets from the second half of November. The MSCI World index had a 3.2% $ performance for the month.

We continued increasing the quality of the portfolio through the month by switching from shares like Trikona Trinity, Emerging Markets Index, Cheasapeake and Pfizer to Nestle, Essilor and BP and further increasing the fund's exposures to Colruyt and Reckitt Benckiser. These are all high quality businesses that can withstand these testing times.

The portfolio is now very well exposed to exceptional companies with very strong balance sheets, most of them operating globally. We still believe this defensive positioning to be the lowest risk stance to take under the current uncertain economic circumstances, also in terms of currency fluctuations.

The new year is expected to still be challenging, but we have clearly made meaningful progress on this road to recovery. It appears that earlier risks of banking systems failures have been addressed. Equity markets will still be confronted by slowing economic growth, continued deleveraging, a shortage of credit and possible deflation. Against that the markets have the benefits of exceptionally low interest rates, massive efforts by governments to reflate their economies and unfreezing their credit markets, attractive valuations and loads of Cash in portfolios waiting for more comfort to re-invest in the markets.