After a poor second quarter for global equity investors, the third quarter showed a strong rebound. The MSCI World Index (MSCI) rose a robust 13.9% in the third quarter after falling 12.5% in the second quarter. Concerns about sovereign risk in Europe, seem to have been replaced by optimism that policymakers will do whatever is necessary to support the global economy, thus leading many commentators to conclude that, even though fiscal policy is being tightened, monetary policy will remain loose for longer. These led to increased appetite for risky assets. Emerging markets outperformed developed markets, rising by 18.2% against 13.9% for developed markets. Industrial metals rose significantly, with tin and lead rising 41.1% and 33.8% respectively. Gold, the star performer of the second quarter, rose only 5.4%. Domestic markets rose to an outstanding 24.9% in US dollars (USD), outperforming both developed and emerging markets. In local currency, the return was a muted 13.3% as the rand rose 11% against the dollar, now trading at two-year highs. Industrials led the domestic rally, rising 18.5% in rands. All sub-sectors within industrials showed positive returns. Financials followed industrials, rising 15.2%. Resources continued to lag the other two major sectors, increasing only by 7.1%. The strong gains seen in commodity prices were negated by the strong rand. Talk of nationalisation of mines and continued strikes in some of the mines did not help the sector either. The fund continues to perform strongly in both absolute terms as well as relative to its peers.

In the second quarter of 2010 global equity markets suffered their first quarterly declines since the start of 2009. The MSCI World Index (MSCI) fell a whopping 12.5%. Just when we thought the global recession was over, concerns about sovereign risk (particularly in Europe) began to surface and equity markets fell sharply. Despite a trillion dollar package from the European Union (EU) and the International Monetary Fund (IMF), aimed at easing the European sovereign debt problems, equity markets continued to fall. And as European governments adopt austerity plans aimed at reducing their budget deficits and high levels of debt, concerns are now being raised about the sustainability of the global recovery. This has been exacerbated by data showing a slowdown in China, resulting in sharp declines in commodity prices, with industrial metals falling by as much as 20% during the period. Only gold and silver managed a positive return, with gold reaching its all-time high.

South African markets did not fare any better as the FTSE/JSE All Share Index (ALSI) fell 12.7% in US dollars and 8.2% in rands. Resources (down 11.9%) led the ALSI lower, continuing their recent underperformance. All mining subsectors fell sharply in line with falling commodity prices, the only exception being gold, which rose an outstanding 16.5%. Financials followed resources lower, with a 7.8% decline, while industrials lost a more muted 4.5%. Our markets continue to be dominated by global events, despite our better fiscal position and positive news from the first FIFA Soccer World Cup in Africa.

We continue to believe that our investment philosophy will, in the long term, provide our clients with competitive returns.

The first quarter of 2010 was pretty much a continuation of the last quarter of 2009 for global equity investors, as the MSCI World Index (MSCI) delivered a positive return of 3.4% on top of the 4.7% return last quarter. This is a fourth straight quarterly gain for global equity investors. On the economic front, the global recession that resulted from the global financial crisis is finally over, with most economies - both developed and developing - reporting positive gross domestic product (GDP) growth in the fourth quarter of 2009. Developing economies continue to lead their developed counterparts with much stronger growth. Asset prices continue to react positively to the economic news. Domestically, the FTSE/JSE All Share Index (ALSI) outperformed its global counterparts delivering a positive 6.1% return in US dollars after the MSCI's 3.4% in the first quarter of 2010. In local currency terms, the ALSI delivered only 4.5% as the rand continued its strong performance against major currencies. Having lagged the other major sectors in 2009, financials began the year strongly, leading the market with a return of 9.9% for the quarter. The lower than expected inflation and slower recovery in the consumer sector prompted the South African Reserve Bank (SARB) to lower the repo rate by another 50 basis points (bps). Interest rate sensitive sectors such as banks and retailers reacted positively to these developments. Industrials performed in line with the overall market with a return of 4.4%, while resources (up 2.1%) underperformed, having led the market in 2009. We continue to believe that our investment philosophy and process will deliver competitive returns for our clients.

The final quarter of 2009 proved yet again to be fruitful for global equity investors as the MSCI World Index delivered a positive return of 4.7% in US dollar terms. This was a third straight quarterly gain, ending an excellent year for equity investors worldwide after a horrendous 2008. The total return for the year from the MSCI World Index was 35.4%, a welcome rebound after a 41.8% decline in 2008. Although this excellent recovery was broadbased, it was the emerging markets that stole the show, delivering an outstanding return of 79% in 2009, versus a 30.8% return from developed markets. South Africa performed in line with other emerging markets, with the FTSE/JSE All Share Index (ALSI) returning 70.1% in 2009 in US dollar terms.

For the last quarter of 2009, the ALSI performed well, delivering a local currency return of 11.4%. This was on top of the 13.9% return achieved in the third quarter. Strong commodity prices continued to support resources, which led the market with a return of 16.7%, ending 2009 with an annual return of 35.4% in local currency. Resources were followed by industrials with a return of 8.5%, and then financials with a 6.5% return. Industrials and financials also had an excellent year with returns of 30.5% and 28.0% respectively.

For the year 2009, the fund has had an excellent return, not only in absolute terms but also relative to our competitors. We believe that our investment philosophy and process will continue to deliver competitive returns for our clients.