The 3rd quarter of 201 0 was an excellent quarter for the fund, with a dollar return of around 11 %. This was achieved by having a nice balance of different asset classes all producing positive return. The MSCI World Index of developed market equities did 13.9% during the quarter in dollars, with Europe excelling interesting considering all the crises in Europe - with a return of 19.4% (well ahead of the US's 11.5% return), although the euro's 10% gain against the dollar played a big role and Australia (23.7%) and Hong Kong (21.9%) also doing well. Fortunately we held a very overweight position in emerging markets (30%-plus versus the benchmark's 13%) as the MSCI Emerging Markets Index returned 18.2%, well ahead of the developed markets, with Turkey (31.9%), South Africa (25.4%) and Thailand (32.5%) excelling.
During the quarter equity markets had a strong July, a weak August and a gang-buster September (developed markets up 9.4 % and emerging markets up 11.1 % )as the northern hemisphere summer ended and fund managers returned to work. Listed property (11 % of portfolio) rose by 14% in dollar terms during the 3rd quarter, adding nicely to your fund's returns, while global bonds (27.2% of portfolio) returned 8.3%, which is superb for three months.
So the fund's recovery in hard currency terms from the 2008 debacle has continued nicely. The fund has overcome the collapse in October 2008, when Lehman Bros went bang, and is now trading at the same dollar unit price as in August 2008 and has surpassed the April 2010 post-recovery high. In euro terms, the fund is trading at January 2008 levels and in pound terms the fund is close to another all-time record high, some 12% higher than the highest unit price recorded in 2008. Obviously in rand terms performances have been negatively affected by rand strength, with the fund up just 1 % during the quarter and down 0.5% for the twelve months to end September (up 7.5% in dollars). The rand gained 10.2% against the dollar, 4.8% against the pound and lost 1.1 % against the euro during the quarter.
Looking ahead:
After the recent big gain in markets (into early October), the elastic may be a tad stretched, meaning we may have a correction or consolidation. However, there is a good probability that after this consolidation markets will continue to recover from the 2008 crash.

Fund Review
The portfolio posted a US Dollar return of 3.7% during the period under review, which was marginally ahead of the benchmark. Attribution shows that the aforementioned was largely due to an overweight emerging market position, while our significant allocation to spread products also contributed to returns. Similarly the growth bias within the equity composite added value; however this was offset by a large-cap tilt, which detracted. Finally the benchmark has 5% in Rand cash and we were fully invested offshore. This masked some of the things we got right as the local unit continued to strengthen against the dollar to be the second best performing currency in 2009 - after being the worst in 2008. Relative to peers the fund is in the top quartile for the calendar year and is in the top half of its sector over 3 and 5 years.

Looking Forward
Equity markets have made a spectacular recovery from depressed levels reached earlier in the year. Progress in 2010 is likely to be more subdued but should be positive. Despite the rally many investors remain fearful of a double dip recession (not our base case). Companies have reacted swiftly to the recession so earnings should not act as a drag on equity markets. Conversely the biggest risk to markets is a de-rating.