SANLAM NAMIBIA MANAGED PRUDENTIAL FUND

Introduction: Market practitioners use, as one of their basic tools, the studying of long term averages and events in the context of what is average. History will no doubt judge quarter three of 2008 as an extraordinary one in the sense that it was far from average. This was in the context not only of the overall equity market volatility but also sector relative performance and also the action of the bond market must also be included in the extraordinary performance category.

Equities: There were two main features in the equity market over the quarter; viz. the sharp and rather dramatic reversal of the relative performance between the Resource sector (-38.9%) and the interest rate sensitive sector, particularly the Banks (+25.5%) and General Retailers (+26.8%). The other, of course, was the general direction of the market as a whole; the All Share Index which had a disastrous September (-13.2%) making the quarter (-20.6%) one of the worst in recent times. No further exposure was added in the Resource area during the quarter, however we were unfortunately a bit light in the interest rate sensitive area. Our strategy has been consistently to look for relatively secure earnings over the next 36 months and the area that we still favour is the Construction sector (+10.6% for the quarter) which we have used as part of the strategy to offset the interest rate sensitive sector. The logic behind this thinking is that we are concerned about earning downgrades materialising in the near future in the broad domestic area of the market excluding public sector fixed investment spending. Our theme remained the same as before, viz, to focus on a three year time horizon and stay with our companies where we feel confident that decent real earnings will be delivered.

Fixed Income and Listed Property. We were not very active in any meaningful way in the nominal bond market over the period which proved to be not such a good decision in the short term as bonds had a strong quarter (+12.6%) outperforming cash (+3.1%) rather dramatically. Note that the comparison over the first 9 months of the year is that cash has out performed bonds by 4.0%. Within the cash area, as in the previous quarter, we were quite active extending the duration by investing again in 1 and 2 year NCD's. The logic of these investments is that we are now, in all likelihood, near or close to the top of the interest rate cycle. No further exposure was added to the inflation linked bonds over the quarter as we believe that, in general, this asset class is now fully valued. Listed Property had a very volatile quarter much in line with the other interest rate sensitive areas of the market. Our low exposure in this asset class paid did not pay off over the quarter as this sector returned an excellent +23.1% over the 3 months. Note that for the year to date (9 month period), the return was -11.9%, justifying our low exposure in this area.

Asset Allocation We went into the quarter exceptionally low in equities and during periods of weakness we added exposure to this asset class believing that the worst was being fully discounted. We are however, still well below in equity exposure relative to our peer group. Some exposure was added to our bond exposure and our first tentative steps were taken to add some Listed Property to the portfolios.

Introduction: The US housing "sub-prime" theme that started in August continued into this quarter resulting in one of the worst quarterly equity performances over the past 5 years. The sector that upheld the equity market for the first three quarters of this year; viz. resources, finally capitulated over this period (-7.5%). However, for calendar year 2007 the JSE All Share Index still returned a respectable 19%.

Equities: The fund had a much better quarter than the previous one, especially in its stock picking. We were rewarded for the period under review by being low in some of the heavyweight mining shares such as Anglo American and Billiton. In addition, a stock that worked for us was the Altron group as they announced their intention of buying the minorities out in Altech and Bytes. We also added some construction shares to the portfolio in weakness as we think that while they're discounting very good news there is still some considerable upside. One area that did detract from our performance was our underweight position in telecoms, particularly MTN.

Fixed Income and Listed Property: We were not active in bonds over the quarter which proved to be a sound decision as the All Bond Index (0.9%) underperformed cash (2.7%) over the quarter. Within cash, as in the previous quarter we were quite active in extending duration by investing heavily in 1 and 2 year NCD's. The logic of these investments is that we are now, in all likelihood, nearing the top of the interest rate cycle. As mentioned in our last quarterly we remain positive on the underlying distribution drivers for listed property but our value criteria was not met and more patience is still required in this area. SA listed property returned -0.4% over the quarter.

Asset Allocation: We were not active at the asset allocation level during the quarter although we reduced equity exposure during the volatile period in November and December. This was done via index futures rather than by selling stocks. We remain close to our long-term target of 65% exposure to equities as we feel there are enough positive drivers in the near term for this asset class to be the top performer over the next 12 months. Careful stock picking should prove superior to asset allocation in 2008. Our decision to be underweight bonds paid off over the quarter, as did being relatively light in listed property. In other words, our dual strategy of cash and equities is likely to be the core theme for the year ahead, unless major dislocations occur in currency and bond markets.