South African financial markets got off to a strong start driven primarily by property (+21.9%) and equity (+13.3%). A positive economic outlook, flat interest rates, strong corporate earnings and continued strength in emerging markets were the key supporting factors. The lower risk asset classes, like bonds (+1.5%), income (+1.9%) and cash (+1.6%) produced positive returns but continued to lag the performances of equity and property. Financials (+14.5%) outperformed both Resources (+12.8%) and Industrials (+12.8%), whilst mid (+20.3%) and small caps (+20.4%) outperformed large cap shares (+12.2%). The fund performed strongly in this environment, producing an 8.9% return for the quarter and a 33% return over the past 12- months. The fund maintained its overweight equity and property exposure at the expense of bonds which added value to performance during the quarter. Relative to their respective benchmarks, the equity and bond component of the fund contributed most to out performance for the quarter, with the property component of the fund only slightly underperforming its benchmark. Significant manager research was conducted in the first quarter which will result in some manager changes in the 2nd quarter. The fund continued to attract assets during the quarter and is well placed to again produce another positive year of performance. The asset allocation of this fund is restricted to between 45% and 55% equity exposure. We feel that this combination produces the optimal relationship between risk and return for moderate investors. This is low relative to its peers who can hold up to 75% and hence in strong equity markets the fund will under perform its peers. This is evident over the past 12 months where the fund lagged by about 3%. However, over the long term returns tend to even themselves out as the market moves through up and down cycles. In its category the fund is the lowest risk alternative and has been awarded 3 out of 5 stars in the Plexcrown survey, which measures risk adjusted returns relative to peers.

South African financial markets finished the year off on a strong note following the release of better than expected inflation numbers in November (3.7% y-o-y). Whilst this was beneficial to the bond (+5%) and income (+2.7%) markets it was again the property (+11.4%) and equity (+7.7%) markets that produced the best returns for the quarter. Cash (+1.6%) lagged. Interest rate sensitive financials (+11.7%) outperformed Resources (+7.2%) and Industrials (+5.7%), which was a reversal from previous quarters in the year when resources significantly outperformed. The fund produced a pleasing return of 5.6% for the quarter and was up 22.7% over the past 12-months significantly ahead of its real return target of CPIX + 5.9% (9.9%).

During the quarter the fund was overweight equity and property and underweight bonds and cash, which added value to performance. The fund finished the year with assets under management of R434m more than double the assets at the start of 2005. The fund distributed income totaling 5.06c per unit in 2005 representing an after fees yield to investors of 3.8%. Benchmarks proved hard to beat in 2005. This was evidenced by the fact that only 2/46 equity unit trusts outperformed the FTSE/JSE All Share (47.3%) for the year and only 1/13 property unit trusts outperformed the SA Listed Property Index (+50%). In this context, even though manager selection in the various underlying funds was good, the Fund underperformed its benchmark for 2005. This was a reversal from 2004 when it outperformed. There were no manager changes in any of the underlying funds during the quarter. We are currently reviewing all managers and may make some changes in the first quarter of 2006.