September proved to be a very strong month for equity performance as sentiment changed yet again. Although economic data releases remained mixed and the likelihood of a below-par recovery became more of a reality, the probability of a further round of quantitative easing in the US increased markedly. This was seen as a positive by markets which, coupled with lessening concerns over sovereign risk in Europe, gave rise to a return of 9.1% (in US Dollar terms) on the MSCI World Index. Until an economic turnaround is clear, it is likely that volatile markets will be the order of the day.

Global bond markets continued to reflect a less sanguine view than their equity counterparts, with yields remaining at levels only previously seen in the height of the recent economic crisis. The outlook for inflation remains unclear in the short term, but fears of deflation do appear to be receding.

While the current environment leads us to remain cautious in our outlook, we believe that certain select opportunities are beginning to present themselves and intend to take full advantage thereof as we re-evaluate our positioning on an ongoing basis.

Following their marked decline in May, equity markets remained nervous and very volatile during June, and again recorded a decline for the month. The cautious tone of the Federal Reserve in the United States and the concerns over unemployment and debt in the Eurozone outweighed the impact of any positive data releases. The outlook for inflation also remains unclear with views being divided as to whether it is inflation or deflation that lies ahead. Global sovereign bond yields continued to decline sharply during the month as central banks kept rates at very low levels and indicated that these levels are likely to prevail for some time. The current environment leads us to remain cautious in our outlook and, while we are of the view that the defensive bias of the fund remains appropriate, economic data and developments continue to be closely monitored as we constantly reevaluate our positioning.

Global equities continued to decline on the back of bad news for the first part of February, before turning back on an upward trajectory as positive economic data began to emerge, giving credence to the belief that the global recovery is intact. The MSCI World Index ended the month marginally up on its starting value. The year ahead promises to be a volatile one for equities, but one during which economic data releases are likely to show a generally positive trend.

Bond yields were mixed during the month, with ten year rates remaining flat in the USA, rising in the UK and declining in the Eurozone

The current environment reinforces our view that the defensive bias of the fund remains appropriate. Economic data and developments continue to be closely monitored as we constantly re-evaluate our positioning.

Global equities ended the year with another "up" month as market sentiment remained positive. By 31 December 2009, the MSCI World Index had risen some 70% from its March 2009 low, and current stock prices are discounting a successful resumption of economic growth. High unemployment, however, will inhibit the strength of the recovery, at least in the early stages. What is also critical is that the stimulus packages that have been put into place are not removed before the recovery has gained some traction.

Bond yields rose quite sharply during the month in the USA and the UK, while the rise in the Eurozone was more muted.

The Fund has retained the concentration of corporate bonds in the current environment. Corporate spreads have been highly volatile in recent months but narrowed quite sharply in December. These spreads do, however, remain above the mean of the last 20 years.