The South African equity markets have faired well during 2007 delivering returns of 19.2% despite the turmoil experienced in global markets post the sub-prime crisis. The ALSI's significant exposure to the resources sector has been the major driver as record commodity prices and proposed M&A activity in the sector have been the key factors. The significant uptick in infrastructure spend in SA has seen the GDFI sector perform very strongly as well. The South African equity markets appear fully priced in relation to their history as well as taking into account forward earnings growth. Market volatility will pick up further as the credit crisis unwinds and more so if commodity prices come under pressure.

In this volatile and difficult environment, we believe our portfolios are well positioned. Our portfolios are trading at a discount to the market, providing higher dividends, a more sustainable ROE in light of the markets higher weighting towards commodity companies. Very importantly though, it is at a lower risk than the market as our focus has been on high quality companies, with strong balance sheets trading at discounts to their intrinsic values.