The Coronation International Active Fund of Funds returned -15.03% (in US dollar terms) for the quarter, against -15.15% from the benchmark MSCI World Index. For a rolling 12-month period, the fund's return of -25.9% is marginally behind that of the benchmark's -25.6%.

The third quarter of 2008 will be remembered for the events of the month of September. July and August saw the oil price decline and weak unemployment data from the US. But September marked one of the worst months in stock market history. The MSCI World Index fell 11.85%; two of the US' largest financial institutions, Freddie Mac and Fannie Mae were nationalized; the fourth largest investment bank, Lehman Brothers, filed a Chapter 11 bankruptcy; Washington Mutual became the largest bank failure in US history and AIG was forced to hand over its stock to the US government in return for an US$85 billion loan. Problems were also experienced in Europe, with Fortis being rescued and some European countries increasing the guarantee on domestic bank deposits.

The US Congress initially rejected a bail-out plan for Wall Street, which saw the markets react very negatively. The plan was then adjusted and a US$700 billion plan has been passed by the US Congress in an attempt to resolve the credit crisis.

In early October, a co-ordinated interest rate cut of 50bps was declared by the US Federal Reserve Bank, the European Central Bank and the Bank of England. The UK also passed a £50 billion rescue plan for its banks and injected capital into RBS, Lloyds TSB and HBOS; leaving the UK government with substantial holdings in these banks.

The US managers underperformed the market in the quarter due to an overexposure to financials, but they have since stabilised and are outperforming in October.

Ruffer Europe and Edinburgh Partners European performed well relative to the MSCI European Index for the quarter. Ruffer outperformed by more than 6% and Edinburgh outperformed by more than 3%. Ruffer continues to be the top performing fund on a year-to-date basis.

The Prusik Asia fund outperformed the MSCI Asia Index by more than 10% for the quarter, helped by holdings in telecoms and cash. Morant Wright outperformed the Nikkei 225 Index by 3%, while IFDC Japan underperformed due to its overweight position in technology and capital goods.

Edinburgh Partners Global outperformed the MSCI World Index by more than 3% in the quarter. Their investment in quality franchises with strong, visible long-term growth should start to outperform as the economy slows down due to the credit crisis.

It is our opinion that - regardless of the duration of the current global slowdown - market performance should move towards value managers over the coming months, which favours the current portfolio of managers.

Market Outlook
The markets have not reacted well to the US and UK bail-out plan. There remains a concern over the effectiveness of the plan to relieve the credit crunch and the resulting impact on global economic growth. Deleveraging in the markets has intensified the sell-off. At the same time, our fund managers are seeing investment opportunities and are waiting for the right time to buy oversold stocks without rushing into a falling market. Tony Gibson Portfolio Manager

The Coronation International Active Fund of Funds returned -3.43% (in US dollar terms) for the quarter, against -1.43% from the benchmark MSCI World Index. For a rolling 12-month period, the fund's return of -10.57% is marginally behind that of the benchmark's -10.18%.

It was a strong start to the quarter, as markets surged on the back of ongoing action from the main central banks to provide liquidity. While no-one believed we had returned to conditions pre-August 2007, there was a growing level of optimism that the worst had passed and normal conditions would prevail. This mood was short-lived as global inflation concerns grew, fuelled by record oil and corn prices. In emerging markets, where growth is still strong, appropriate interest rate and reserve adjustments are being made. In the more developed markets, however, where recession is a strong possibility, the central banks are walking a tight rope on interest rates. Faced with plummeting house markets, the Fed and BOE have (to-date) resorted to rhetoric on rising interest rates, while the ECB has raised rates 25 basis points. The uncertainty weighed heavily on the equity markets in June, resulting in an extremely negative month which took returns for the quarter into negative territory.

Wyper Core Fund had a very strong quarter, returning +5.1%, as did IFDC Japan Dynamic and Ruffer European funds. UOB Kinetics and Morant Wright were in-line with their respective benchmarks. After an excellent first quarter, Comgest were somewhat behind this quarter as some of the new long-term themes worked against them. Edinburgh Partners continued their poor run with both the Global and European funds underperforming and we are in frequent contact with Edinburgh Partners to understand this performance; they share our frustration while the market continues to shun their quality franchises with strong, visible long term growth. We have faith in their investment approach and believe that they will outperform in the medium term.

As an overall comment on our managers; the past six months has undoubtedly been an extremely difficult time for value managers; with momentum managers outperforming significantly.

Given our bias towards value managers, this factor has negatively affected performance. It is our opinion that - regardless of the duration of the current global slowdown - market performance will again move towards value managers over the coming months.

Market Outlook: At the time of writing there are still many challenges facing the markets. Oil and commodity prices remain high (driving inflation concerns) while the banks and other financials continue to struggle with the fallout from the credit markets. We expect the uncertainty to prevail for some time and equity markets to remain volatile. This will inevitably create pockets of opportunity as fear and greed drive prices to extremes. As always, we expect that our managers will prevail and outperform over the medium to longer term.

Tony Gibson
Portfolio Manager

The fund returned 8.95% (in rands) for the quarter, outperforming the 8.08% of the benchmark MSCI World Index. On a rolling 12 months, the fund's return of 8.69% is slightly ahead of the benchmark's 8.05%.

2008 began where 2007 finished off as global equity markets experienced one of the worst starts to the year. A steady drip of bad news from US and European banks, recessionary fears and flight to safety resulted in a 8.95% drop in the MSCI World Index (in US$ terms) over the quarter. The Fed took drastic action in cutting rates and stepped in to arrange a takeover of an ailing Bear Sterns. In Europe, the ECB also took action to provide liquidity, but both it and the Bank of England have been a little less enthusiastic about cutting interest rates in the face of inflation concerns. Emerging markets were amongst the largest fallers during the quarter and a weakening rand contributed in the fund's positive performance for the quarter.

For the period, the fund was underweight to North America and overweight to Asia which detracted from performance. A good level of cash also helped performance.

We were disappointed with some of our underlying managers who did not perform as well as we would have hoped. UOB Kinetics and Wyper Core both underperformed their respective benchmarks by a large margin. A characteristic we look for in a manager is a strong research process coupled with a good level of conviction. In the case of UOB Kinetics, this is particularly evident as they maintain their call on global exchange and asset managers (this has gone against them this quarter). Indeed, it is difficult to fault their judgement when an undervalued business has performed as expected with no deterioration in the fundamental business, yet the price has fallen 30%.

Elsewhere, Morant Wright did well in a falling Japan market but was offset by a poor quarter from IFDC. Our view on Japan is that despite the negative macro economic outlook, it currently offers some excellent global companies at bargain prices and is due for upward move in the medium term.

Ruffer European was our best performer as the high cash weighting and option overlay resulted in a 1% when the markets fell by 15%. Over an extended period, this is one of the best performing European funds, mainly because of the protection afforded by the manager's portfolio construction and option overlay. The fund has protected capital over the last two significant bear markets even though it may cost a little on the upside.

Tony Gibson
Portfolio Manager

The Coronation International Active Fund of Funds returned -2.34% for the quarter against -3.10% by the benchmark MSCI World Index. For a rolling 12 month period, the fund's return of 5.32% is behind the benchmark's 7.02%.

Equity markets fell during the quarter as a steady stream of bed news flowed from banks, retailers and economists. Write-downs on sub-prime assets by major US banks and, in some cases, capital raising as well showed just how serious the credit crisis was. The Fed cut rates by another 25 basis points in December and joined in other central banks in a major liquidity providing exercise in an effort to bring down the inter-bank lending rates. Weak retail sales and a falling housing market also prompted the Bank of England to cut rates by 25 basis points. By the end of December, it was almost consensus that America was heading for a recession in 2008 and how this would affect the rest of world, especially the booming emerging markets weighed heavily on investor's minds.

For the period, the fund was underweight to North America and marginally overweight to Asia, which helped performance. Towards the end of the quarter, the fund also benefited when Copper Spire announced that it was closing down and went into cash for the last six weeks of the quarter.

Amongst the funds, UOB Kinetics Paradigm enjoyed strong quarter after being marginally negative in US markets that fell almost 4%. This was driven by their exposure to oil and financial exchanges, which benefited from rising oil prices and increased trading volumes during the recent market volatility. Comgest Nouvelle Asie returned 4.3% for the quarter during which the market was down 1.5%. Comgest look for high quality growth companies using a fundamental and thematic process and their stocks held up well during the period. Edinburgh Partners Europe fund enjoyed a good quarter falling only 0.8% compared to the -3% of the European indices. Edinburgh Partners have not enjoyed the best of years as the lack of exposure to emerging markets together with high exposure to Ireland has held them back. We trust that this is a turning point in the funds performance.

On the downside, Japan had another poor quarter falling almost 9% (in yen terms). We have remained optimistic and retained exposure to the country through Morant Wright Japan and IFDC Japan Dynamic funds. Although Morant Wright has a conservative approach and is naturally defensive, their exposure to small caps resulted in an in line performance over the quarter. IFDC is more growth orientated but as that is in short supply in Japan at present, it too fell in line with index.

Tony Gibson
Portfolio Manager