Investment Environment
The Fund came under ever increasing pressure from exposure to the domestic equity market that continued to decline over the past quarter. The Fund generated a negative return over the past quarter, but losses were limited in a severely negative market environment. The domestic equity market was mainly influenced by international events emanating mostly from the USA and Europe where credit markets came under stress. Local inflationary pressures remain high with some relief forecast during 2009.

The market continued with the downtrend that started at the end of the previous quarter, with the downtrend accelerating during Sep2008. A decline in commodity prices led to a sharply lower resources index. The equity portfolio of the Fund largely represents the Top40 index - meaning that the Fund's performance trend will be broadly in line with the market.
The tactical hedge position was adjusted during the quarter where protective put positions were rolled up-and-down to maintain protective levels within the 'Floor' risk model constraints. The hedge positions on the resource stocks implemented during the previous quarter were unwound during the quarter after these positions provided a good buffering against the initial drop in the resource sector.

The risk model constrained the fund's effective exposure to the equity market in the range of 40% to 20% over the past quarter, reducing the effective market exposure as the market trended lower.

The fund is invested in equities, cash and money market instruments. The remaining concern over inflation, with a sharply lower exchange rate, leaves bonds and property currently unattractive investments on a risk-return basis.

Current Investment Position
The Fund has protection against equity market downside risk, and the low effective equity market exposure means that we are actively looking for opportunities to increase market exposure, within the risk model constraints.

The market continued sharply lower in October, but with the Fund's effective equity market exposure below 20%, the impact on the Fund is contained. The current challenge lies therein to increase the Fund's market exposure within the risk model constraints in order to capture any potential equity market upside from these depressed levels.

Investment Environment:
The Fund started the quarter on a positive note but came under pressure over the past month due to equity market weakness. The Fund generated a small positive return over the past quarter. The rising commodity prices that initially drove international and domestic markets, eventually led markets lower as concerns over rising inflation and energy costs clouded the economic outlook. The strong rise in the domestic inflation rate, that is being countered with a higher interest rate added additional downward pressure on the domestic equity market over the past few weeks.

Fund Manager Interventions:
The market started the quarter with a steady upwards trend, but weakened substantially at quarter-end. The main contributor to the market performance was the resources index, with the financial index posting a strong negative return over the quarter. The equity portfolio of the Fund largely represents the Top40 index - meaning that the Fund performed broadly in line with the market.

The increased market level towards mid-quarter was used as an opportunity to restructure the tactical hedge position with the aim of locking-in returns as well as adjusting the hedge instruments to more specifically cover some of the larger resource sector stocks. The hedge position on these resource stocks lowered the fund's overall effective market exposure but one should keep in mind that an upside cap-level of 20% to Mar'09 has been implemented for these hedge positions.

The risk model maintained the fund's effective exposure to the equity market in the range of 40% to 55% during the first part of the quarter. Subsequent market weakness, with the added impact of the resource sector hedge, reduced the effective exposure to be in the range of 25% to 35%.

The fund is invested in equities, cash and money market instruments. The equity portfolio is constructed to move broadly in line with the JSE/FTSE Top40 Index. The remaining concern over inflation and possible further interest rate increases makes bonds and property currently unattractive investments on a risk-return basis.

Current Investment Position:
The Fund is well protected against equity market downside risk, especially against weakness in the resources sector. The low effective equity market exposure means that we are actively looking for opportunities to increase market exposure, within the risk model constraints.

Investment Environment
The Fund delivered a negative return over the past quarter, through exposure to the equity market that accelerated into a downtrend towards year-end. The continued increase in energy prices, concerns about the US housing market and tighter global credit markets placed equity markets under continued pressure, leaving most international equity markets with negative returns over the past quarter.

Investment Flows
Investment flows were negative at approximately R1.4m outflow over the past month, to bring the total outflow for the quarter to approximately R18m.

Fund Manager Interventions (refer to Fund Monitor graph below)
The equity market was volatile during the past month within an overall downtrend, with some of the severe losses at midmonth being recovered towards month-end. The protective derivative positions (options) absorbed this market volatility and reduced the fund effective equity market exposure during the downturn from47%to 30%. The market weakness during mid-month provided the opportunity to restructure the Fund's protective put option positions. One of the main adjustments was to roll-down some in-the-money options, in order to lock-in the protective gains as well as to increase the effective option protection in case of further market downside. (This restructuring coincided with the SAFEX close-out.) The fund is invested in equities, cash and money market instruments. The concern over inflation and possible interest rate increases makes bonds and property currently unattractive investments on a risk-return basis.

Protective "Floor" Level
The fund's unit price moved lower without providing an opportunity to reset the protective "Floor" level upwards.