The September market correction presented investors with attractive short-term investment opportunities. The Fund took advantage, decreasing cash holding to 17% of the value of the portfolio. The Fund remained cautious, continuing with put-options against 34% of the portfolio.

Companies in the Building and Construction industries appear to have demanding valuations, however earnings projections accompanied by substantial profit growth can be made with conviction. Certainty exists that South Africa needs to spend the allocated capital, irrespective of interest rates or commodity prices. The Fund maintained an exposure in GDFI (infrastructure) related companies of 26.6% of the portfolio through investments in Aveng, Ceramic, Esor, and Sanyati and new investments in Altron, Group Five and recently listed RBA Holdings.

Interest rate sensitive counters could continue to experience adverse pricing pressure; this expectation is mostly reflected in the rating of the shares. ABIL's offer to acquire Ellerine supports our view of attractive valuations of the furniture sector. Ellerine's share price reacted positively on the news, prompting the Fund to take profits and re-invest in the sector via Lewis. The undemanding valuations of the Financial and Retail sectors provoked the Fund to increase its exposure in these two sectors. The Fund remained invested in Firstrand, Investec, JD Group, Lewis and Metropolitan, and bought into Foschini, Standard Bank and Truworths increasing the exposure in Financials to 19% and Retail to 9.7%.

Famous Brands is an integrated food and beverage company whose key activities are the franchising of trademarks into quick service restaurants like Steers and Wimpy. The company's record of earnings growth and profitability combined with an attractive business model and industry position prompted us to invest in this share.

The lower risk profile of Tiger Brands, accompanied with a superior profitability history relative to the market as well as the indicated unbundling of Adcock Ingram, led us to invest 5.3% of the Fund's assets in this counter.

A substantial property portfolio combined with an attractively valued chemical and explosives business prompted the Fund to invest 5% of its assets in AECI.

The Fund remains exposed to Rand Hedges and Foreign Investments with 13.4% of the capital invested in the Allan Gray Orbis Global Equity Feeder Fund and Richemont.

The ratio of Fixed Capital Expenditure to GDP rose to more than 20% in the 1st quarter of 2007 for the first time since 1989. Companies in the Building and Construction industries appear to have demanding valuations but earnings projections accompanied by substantial profit growth can be made with conviction. In conjunction with relatively undemanding forward multiples, it is certain that South Africa desperately needs to spend the allocated capital, irrespective of interest rates or commodity prices. The Fund maintained an exposure in GDFI (infrastructure) related companies of 17.6% of the portfolio through investments in Aveng, Ceramic, Esor, and Sanyati.

In June 2007 the South African Reserve Bank again increased the repo rate with 50 basis points. With the implementation of the New Credit Act and mounting inflation pressure, the Fund reduced the equity exposure, maintaining portfolio insurance and increasing the cash balance to 25%. The Fund endeavours to continue this practise in future should investment prospects remain unattractive. Interest rate sensitive counters could continue to experience adverse pricing pressure but this expectation is mostly reflected in the rating of the shares. The Fund finds value in these sectors and continues to be exposed to the Financial (17.6%) and Consumer Services (6.9%) sectors via Brait, Firstrand, Investec, Metropolitan, Ellerines and JD Group.

The lower risk profile of Tiger Brands, accompanied with an attractive valuation and superior profitability relative to the market, prompted the Fund to invest 5.5% of its assets in this counter. The Fund invested 10.7% of its capital with the Allan Gray Orbis Global Equity Feeder Fund. This investment and its investments in Richemont and Sasol, makes the total Rand Hedge exposure of the portfolio approximately 26%.

The JSE All Share Index has registered repeated new highs in recent weeks. Given that the current bull market is nearly four years old it is reasonable to expect that the high returns on equities in 2005 and 2006 will not be matched in 2007.
The South African economy is still in the early stages of adapting to the changed policy environment of higher interest rates. We are of the view that the interest rate cycle will not reach levels that will substantially reduce the profitability of retail companies. We maintained a large exposure to the retail sector through Ellerine, Foschini Mr Price and Truworths.
The infrastructure development theme continue to exhibit strong fundamentals. We accordingly increased our exposure to construction companies, investing in Esor.
Enviroserv focus on the full spectrum of waste management services, ensuring that clients comply with rigorous environmental standards, implementing ever-increasing environmental standards to ensure environmental compliance. Enviroserv boast a formidable history of profitability and earnings growth, coupled with an attractive valuation.
The convergence of telecommunication devices and services, coupled with the need for telephony services in Africa and the Middle East prompted us to invest in MTN, a company with a comprehensive footprint across Africa and the Middle East and well known to consumers across the African continent.
We participated in the listing of AltX listed telecoms product and services provider, Celcom, an entrepreneurial small capitalisation company providing goods and services within the telecoms market. The consensus is that the rand won't deviate to far from current levels, thus we reduced and sold securities with Rand hedge qualities (Remgro, SAB Miller, Steinhoff and Richemont) and reduced foreign equity exposure, selling Itrix FTSE 100