Fund Review
The Fund outperformed the Composite Benchmark by a tidy margin.
In the quarter we made one strategic asset allocation call, reducing our property holding to zero. We are of the opinion that property is expensive relative to other asset classes and that the equity risk premium has reduced to an insignificant amount. One of the star performers during the quarter was the Fund's investment in the New Gold ETF. The global debt crisis coupled to a structural increase in the demand for gold plus a weaker South African Rand was positive for the New Gold ETF. We have not altered our bond exposure in the Fund. We have a dovish view on interest rate hikes in South Africa and believe that rates will remain flat late into 2012. The Fund's weighting in SA equities remains relatively unchanged quarter to quarter. We continue to be cautious on the SA equity market with a preference for global equities, which in our opinion offers better value.
We changed the Resource exposure of the Fund, continuing to favour the diversified commodity shares over the single commodity stocks. The two resource trades made were the sale of Exxaro (coal play) into Anglo American and the reduction in the Sasol holding to increase the Fund's weighting in BHP Billiton. Both Anglo American and BHP Billiton are attractive relative to historical valuations, while Sasol is fully valued given its project pipeline and earnings growth profile. We maintained our large exposure to consumer related shares being of the opinion that the consumer will be the driver of South African economic performance over the next few years. Thus the Fund has large exposures to telecoms, retailers and healthcare. A large portion of the Fund is invested in MTN and Vodacom. Telecoms shares are cash generative with decent dividend payout ratios. Retailing shares such as Woolies, Shoprite and Mr Price provide the Fund with direct exposure to the SA consumer. Healthcare remains an overall theme and the Fund's exposure to Aspen, Life Healthcare and Netcare will provide the necessary exposure to the sector. FirstRand and Nedbank remain our preferred banking shares.

Looking Ahead
Going into the 4th quarter of 2011, our view is that global equities will continue to outperform domestic equities. We continue to position the Fund for moderate SA GDP growth that remains consumer driven. The Fund's SA equity holdings target companies that are exposed to the global commodity cycle and the SA consumer. Our commodity exposure is a hedge against continued global volatility and the European debt situation.

Fund Review
In the quarter we introduced a new asset class to the Fund, namely the New Gold ETF that is defined in terms of Regulation 28 as a commodity. We have a positive view on gold bullion, as investment demand remains strong. It is important to note that we have not bought gold shares, as gold companies have been unable to convert the growth in the gold price into earnings. We also increased our exposure to bonds by around 4%. The increase in the bond weighting is a function of our dovish view on interest rate hikes in South Africa coupled to the global investor's search for yield. The STANLIB view is that interest rates will remain flat into early 2012. We continue to remain cautious on the South African equity market with a preference for global equities, which in our opinion offers better value. We made no changes to the Resource exposure of the Fund and continue to favour the diversified commodity plays over the single commodity stocks, hence the large exposures to BHP Billiton, African Rainbow Minerals and Exxaro. Sasol a diversified oil/chemical play remains one of the largest holdings in the Fund. We have maintained our large exposure to both telecoms and healthcare. MTN is our largest equity holding. During the quarter we added three new consumer related shares: Famous Brands (convenience dining), Lewis (furniture) and Mr Price (clothing and apparel). In our opinion the SA oonsumer will continue to be the main driver of GDP growth. Financial shares make up 15% of equities. This is a mixture of Banks, Life companies and Financial Services companies. We have made one change to our financial positioning, namely the sale of the JSE, given other investment opportunities in the market. FirstRand and Nedbank remain our preferred banking shares.

Looking Ahead
Going into the 3rd quarter 2011, our view is that global equities will continue to outperform domestic equities. We continue to position the Fund for moderate SA GDP growth that remains consumer driven. The Fund's SA equity holdings target companies that are exposed to the global commodity cycle and the South African consumer. Our commodity exposure is a hedge against continued global volatility and the European debt situation.

Fund Review
The fund outperformed the Composite Benchmark by a tidy margin. During the quarter we reduced the Fund's holding to South African equities as we are more cautious on the South African equity market after the stellar performance it has delivered over the last 18 months. Foreigner investors will begin to invest in developed markets vis-à-vis emerging markets, as developed markets offer value. The South African All Share Index looks fully valued when compared to both World and Emerging market indices.
We also made some adjustments to the equity portion of the portfolio. In the resource portion of the fund we switched Implats into Amplats. Implats looks expensive relative to Amplats and Amplats has a better earnings profile over the next year or so. The current resource weighting in the equity portion of the fund is around one third.
Our industrial exposure is 48.5 per cent of total equity. We have maintained our large exposure to telecoms shares MTN and Vodacom. MTN is our largest equity holding in the fund. During the quarter we sold our holding in Massmart to zero. The reason for the sale is that there have been large earnings downgrades over the quarter. A further concern is that the continual delay of the Competition Authorities approval of the Wal-Mart acquisition of Massmart may result in the deal falling away and shareholders not receiving the offer price of R148. The proceeds of the sale were used to increase our holdings in the pharmaceutical-hospital shares like Aspen, Netcare and Life Healthcare. These shares are attractive due to their growth profiles and quality of assets. Each year more of the population requires more expensive medical treatment. We also added to our holding in Imperial Holdings following on the recovery in vehicle sales to 2008 levels and market share gains for Hyundai and Kia.
Financial shares make up 17.5 per cent of equities. This is a mixture of Banks, Life companies and Financial Services companies. We have made no major changes to our financial positioning. FirstRand and Nedbank remain our preferred banking shares.
Looking Ahead
Going into the 2nd quarter 2011, we maintain our cautious view on South African equities in light of the prior year's strong performance, the impact of the Middle East Crisis and the Japanese earthquake. Our preference remains for global equities, where we find undemanding valuations and strong earnings growth prospects.

Fund Review
The Fund outperformed the Composite Benchmark by a tidy margin. The Fund closed the quarter with the following asset allocation (per cent): Equities 24.2, Property 3.9, Bonds 17.9, Cash 40.9 and Offshore 13.1 . Our current total equity exposure is 37.7 per cent (including offshore). During the quarter we made adjustments to the Fund's positioning in the various asset classes. We increased the Fund's exposure to South African bonds because bond yields looked cheap relative to cash over the quarter. In sharp oontrast we cut our offshore bond holding to zero and switched the proceeds into global equities. In our opinion global bonds offer little value at current yields, while global equities offer relatively more value. During the quarter we reduced the Fund's holding to South African equities as we are more cautious on the South African equity market after the stellar performance it has delivered over the last 18 months. We also made some adjustments to the equity portion of the portfolio. In the Resource portion of equity part of the Fund we participated in the initial offer for the Royal Bafokeng Platinum mine. In our view Royal Bafokeng Platinum has exiting growth prospects over the medium term. The current Resource weighting in the equity portion of the Fund is around 31.9 per cent. Our Industrial exposure is 49.5 per cent of total portfolio equity. We have maintained our large exposures to telecoms shares MTN and Vodacom. MTN is our largest equity holding in the Fund. Retail shares like Massmart, Woolies and Pick & Pay remain dominant positions in the portfolio. We have now switched the Pick & Pay exposure into the holding oompany structure PikWiK. We believe the maximum value unlock will be from an unbundling of the PikWik structure. The Fund oontinues to hold Massmart. The Walmart Massmart transaction at R148 will occur during the 1st quarter 2011. Financial shares make up 18.6 per cent of equities. This is a mixture of Banks, Life oompanies and Financial Services companies. During the quarter we reduced the Fund's exposure to Standard Bank to zero, as we believe the valuation is full. Our preferred bank is FirstRand post the unbundling of the life assets during the quarter.

Looking Ahead
Going into the 1st quarter 2011, we are more cautious on equities than previously. We have reduced our equity weighting in the Fund, as we believe that 2011 could be a more difficult year for equities as the easy returns have been made over the last 18-month period.