The South African equity market was again supported by the rally in global equity markets as well as the weaker currency. Despite the sharp drop experienced in most commodity prices, resource stocks managed to hold up due the weakness in the Rand. Financial and Industrial stocks performed strongly, returning 4.3% and 4.2% respectively. The JSE Top 40 index of large cap stocks continued to outperform the Mid- and Smallcap stocks. Against the backdrop of a slowdown in global economic growth, rising local interest rates, lower commodity prices and emerging market jitters, we believe the risks for the equity market is mounting. Trading near its all-time high, the All Share index looks vulnerable. We have therefore maintained our cautious approach aimed at protecting capital within this fund by keeping the equity exposure close to its 40% minimum level.

The Select Manager Prudential Active FoF returned 0.96% for the month of September. Strong performers were the Coronation Absolute fund with a 3.1% return and the Nedbank Rainmaker fund with a 2.3% return.

Global equity markets continue to struggle with the implication of further interest rate hikes on future global growth. This uncertain backdrop caused volatility to remain high in the South African market. The Rand recovered as the SA Reserve Bank hiked rates for a second time. Further hikes are expected within the next 6 months. The extreme divergence in returns posted by the equity market during June was mostly reversed in July. The Resource 20 index returned 10.1% in June and lost 4.9% during July. The Industrial 25 index lost 0.4% during June and gained 1.3% during July. So too the Financial 15 index lost 1.3% during June but rose 1.2% during July. The mid- and small cap indices also reversed some of its relative losses returning 1.8% and 2.2% versus the negative 1.9% of the JSE Top 40 index. Property stocks remained under pressure as higher interest rates impact future expected returns.

The Select Manager Prudential Active FoF returned -0.22% for the month of July. The equity and asset allocation funds struggled to deliver positive returns during the month. Coronation Absolute's return of 0.26% was the exception. The Investec Opportunity Income fund returned 0.55%.

The outh African equity market continued to closely follow globalS markets. The All Share Index returned 7.1% for March with Resources posting the highest return of the Large Cap stocks at 9.0%. During the quarter mid- and small cap stocks outperformed large cap stocks by returning in excess of 20%. The bond market returned a rare negative 0.2% for the month. On balance the environment for the local bond market remains marginally negative. From an equity perspective earnings data remains very solid and fundamentals continue to support current ratings, although looking more demanding. The lacklustre returns expected from other asset classes could continue to sustain the rally in equities.

The Select Manager Prudential Active FoF returned 2.94% for the month of March. During the month we sold out of the Coronation Property Equity fund and the Coronation Strategic Income fund in favour of the Stanlib Aggressive Income fund. This fund has full flexibility to move between bonds, cash and property. The specialist skills of Marriette Warner in the property sector will therefore drive the asset allocation decision to property stocks within the Select Manager Prudential Active Fof portfolio.

The incredible 8.1% return for December of the equity market ended a year of bliss for equity investors. Foreign investors were again attracted to the SA market as the positive sentiment towards commodities, and gold specifically, continued. Despite this support for Resource related stocks, the Financial sector was the star performer for December. Financial stocks returned 10.2% for the month versus the 7.6% of Industrials and 7.2% of Resources. The bond market did well to return a further 2% in December after November's 2.1% return. Inflation expectations remain subdued and the probability of an imminent interest rate hike has subsided.

The Select Manager Prudential Active FoF returned 4.5% for the month. The Investec Equity fund returned a very strong 9.5% for December outperforming the equity market by nearly 1.5%. The stock selections in this fund proved superior during December as the fund was not overweight the outperforming Financial sector. The Select Manager Prudential Active FoF returned a very rewarding 21.6% for 2005.