The fund had a small positive return over the past quarter, under volatile sideways-moving market conditions. The market was impacted by global growth concerns and interest rate worries and locally by a further weakening of the Rand and the widening current account deficit. The fund continued to attract strong investment flows over the past quarter, with inflows of more than R100m. At the end of September the fund size was approximately R350m. Equity market weakness during early July meant that the Fund's market exposure was reduced to below 20% in order to contain downside risk. Subsequent market recovery meant that we increased equity market exposure to just below30% at the end of August. The risk management model contained the effect of the equity market volatility during early September, and the fund is well positioned to participate in further market upside. The expectation of rising interest rates and potential inflationary pressures make investment in bonds and listed property unattractive from a real return point of view and the Fund will maintain zero exposure to these asset classes until conditions improve. Because of the high level of market volatility and subdued Fund performance during the quarter, the protective 'floor' level was not adjusted upwards, thereby maintaining the ruling protective level as at the end of the previous quarter. The underlying equity portfolio was constantly adjusted to cover new investment flows and to reflect our model portfolio. Currently the fund is invested in equities, cash and money market instruments.

The fund had a flat return over the past quarter, under volatile market conditions that were triggered by global inflation and interest rate worries. The local markets were also troubled by a weakening exchange rate and an interest rate hike. The fund continuous to attract strong investment flows, again doubling in size over the past quarter as it did during the 1st quarter of 2006. At the end of June the fund size was approximately R240m. The Fund participated in the strong equity market of the first half of the quarter, and effective equity market exposurewas maintained at around 50% of fund market value. During subsequent market weakness, the riskmanagement model caused this exposure to be reduced to below 20% in order to contain downside risk. Our equity derivative hedge positions worked extremely well to lower the market exposure. The recovery in the equity market allowed exposure to be slowly increased over the last two weeks and the Fund is well positioned to participate in further upside. The rising interest rate risk and inflationary pressures make investment in bonds and listed property unattractive from a real return point of view and the Fund will maintain zero exposure to these asset classes until conditions improve. On the back of the positive performance early in this quarter, the protective 'floor' level was adjusted upwards, causing the risk model to quickly reduce market exposure during the subsequent equity market weakness. The underlying equity portfolio was constantly adjusted to cover new investment flows and to reflect our model portfolio.Currently the fund is invested in equities, cash and money market instruments.

The 1st Quarter of 2006 kicked of with equity markets moving up strongly in January, providing nearly two-thirds of the expected annual return for the equity market! During the middle of the quarter the markets turned volatile, with a strong downward move in early March wiping out all the initial equity market gains. However, based on a firm domestic economic outlook and strong commodity prices the market rebounded strongly during the middle of March to end the 1st Quarter on a strong positive note. We started to increase the fund's equity exposure during January with the market rising steadily and strongly. At the end of January the fund's effective equity market exposure was approximately 40%, and after such a strong market performance (on top of the previous year's strong performance) we decided to raise the fund's protective floor level. Initially this proved to be the right decision, and caused the fund's market exposure to be reduced quickly during subsequent market weakness. When markets fell in early March the risk model reduced the fund's market exposure to just below 20% - quite a low market exposure. Strong inflows also helped to dilute the fund's market exposure during this time. The strong rebound in the market later in March and resultant recovery in fund value, allowed us to again increase equity market exposure. At the end of March the fund's effective equity market exposure was just below 45%. The conservative protective floor setting therefore adequately protected the fund, but then detracted from fully participating in the strong market performance. The underlying equity portfolio was constantly adjusted to cover new investment flows and to reflect our model portfolio. Currently the fund is invested in equities, cash and money market instruments.