The third quarter of 2008 saw a rapid reversal of wellestablished recent trends and saw major equity market sell-offs in July and September. The Fund's aggressive underweight positioning in Resources stocks and generally good stock selection within Financials and Industrials resulted in outperformance of market indices and peer funds.

During the quarter, most commodities (besides gold - down only 5%) were sold down aggressively, with platinum down 51%, oil down 28% and base metals down strongly (e.g. copper down 26%). This was on widespread worsening projections for global growth - recession fears in G3 countries and marked slowdowns in emerging markets (even China) - and a much stronger US dollar. In addition, the credit crunch claimed a number of high profile, large financial institutions (Fannie Mae, Freddie Mac, Lehman Brothers, AIG, Fortis) as confidence in the global banking system evaporated. South Africa was a relative safe haven, with the SARB holding rates constant amid a general expectation that inflation had peaked. This view was strengthened by the expected effects of an impending basket re-weighting next January, which will see a technical reduction in inflation, and was despite inflation figures printing way outside of the SARB's target range. The rand weakened 6.2% against the US dollar, but strengthened 5% against the pound and the euro.

Across global markets, headline indices all sold down, with the S&P 500 down 9.5%, the Nikkei 225 up 16.5% and the MSCI Emerging Market index down 27.6%.

The local market was down 21.6% in rand terms, with a massive reversal within sectors: Resources (down 38.3%), Financials (up 11.9%) and Industrials (down 4.4%). Interest rate sensitive stocks, especially banks and retailers, had very strong quarters as inflation fears receded. Domestic political turmoil was generally ignored by the market except for negatively received key cabinet minister resignations late in the quarter. Our Fund's relative performance over the quarter was very positively impacted by our underweight position in the Resources sector, particularly in: Anglo American (down 48.7%), Anglo Platinum (down 40.9%) and Exxaro (down 39.8%). Our banks holdings also assisted the Fund's performance (ABSA up 35.3%, Standard Bank up 25.2% and FirstRand up 25.7%).

Stocks which detracted from performance were predominantly the Resources shares which we did hold, namely: Impala Platinum (down 42.7%), Mvela Resources (down 36.9%) and Sasol (down 24.9%). Looking ahead, we are generally:

-continuing to avoid interest rate-sensitive consumer cyclicals, despite remaining positive on the banks sector and media sector on valuation grounds

-looking at selected resources stocks for buying opportunities as they are indiscriminately sold down - especially those with production volume growth on the near-term horizon

-positioned in high quality, cash generative global and local companies - particularly those not dependent on consumer demand, which we forecast to be very weak in the medium-term

-avoiding companies, where margins are potentially at peak levels and could disappoint in the economic slowdown

-selectively buying oversold, very cheap mid-cap stocks.

The Fund remains fairly aggressively positioned in our best stock selections, based on our team's proven bottom-up stock picking process.

Gavin Wood
Portfolio Manager

The second quarter of 2008 was again volatile and, while most equity markets were broadly flat, they retraced substantially off their late-May peaks. The Fund's aggressive underweight positioning in Resources stocks detracted from its performance, although the extent of this was mitigated somewhat by generally good stock selections within Financials and Industrials.

During the quarter, the market recovered as the credit crunch appeared to be stabilising. Early gains were then wiped out as inflation fears surfaced on the back of the rampant oil price (up 35% in Q2) and expectations emerged that central banks would be raising interest rates. In addition, further write-downs in international banks saw confidence in financial shares reach new lows. Europe and Japan saw expectations for growth in their economies weaken.

Across global markets, headline indices closed mixed with the S&P 500 down 3.2%, the Nikkei 225 up 7.6% and the MSCI Emerging Market index down 1.6%.

The local market was up 3.4% in rand terms, despite a broadly stronger local currency (4% stronger vs. the US dollar). The massive divergence between Resources (up 13.4%) and Financials (down 14%) and Industrials (1.1% down) continued on the back of very strong commodity prices, in particular: steel, iron ore, coal and oil. Interest rate sensitive stocks were sold down strongly as the SARB raised rates 0.5% at each of its June and April meetings in the face of rapidly rising inflation expectations. Food, oil and electricity prices are the main inflation drivers, but now appear to be having second round impacts.

Most domestically-focussed shares were again sharply down this quarter, as the market reflected lower growth expectations and higher discount rates.

Our Fund's relative performance over the quarter was again very negatively affected by our underweight position in the Resources sector, particularly in: Exxaro (up 30.9%), BHP Billiton (up 24.0%) and Anglo American (up 14.0%). Additional detractors from relative performance were positions in: Mondi (down 27.9%), Investec (down 17.8%) and Firstrand (down 16.9%).

Mitigating the relative underperformance were our holdings in Naspers (up 21.3%), Sasol (up 19.7%) and Telkom (up 12.8%). We again avoided some of the quarter's worst performers, e.g. PPC (down 27.3%), Barloworld (down 24.9%) and Foschini (down 23.3%).

Looking ahead, we are generally:
o continuing to avoid interest rate-sensitive consumer cyclicals, despite remaining positive on the banks sector and media sector on valuation grounds
o much more negative on the resources stocks, given concerns about the impact of the global slowdown and the role played by (potentially temporary) investment demand for commodities in boosting prices,
o positive on the food retailers, given defensive demand and rampant food inflation
o positioning in high quality, cash generative global and local companies - particularly those not dependent on consumer demand, which we forecast to be very weak in the medium term
o avoiding companies, where margins are potentially at peak levels and could disappoint in the economic slowdown

The fund remains fairly aggressively positioned in our best stock selections, based on our team's proven bottom-up stock picking process.

Gavin Wood
Portfolio Manager

The first quarter of 2008 was again volatile and most equity markets were sharply lower. The Fund's underweight positioning in Resources stocks saw it produce negative (and below benchmark) performance for the first time in many quarters - it was down 3.8%.

During the quarter, global deleveraging saw financial asset prices move lower, which was exacerbated by sharply lower economic growth expectations in most developed economies. The US Fed cut interest rates by 2% in an attempt to contain the damage, despite global inflation moving higher - due mostly to massive increases in food and energy costs. Europe and Japan saw their currencies strengthen against the USD by 8.4% and 10.7% respectively, denting prospects for their exporters.

Unsurprisingly, equity markets moved lower over the quarter. Across global markets, headline indices closed weaker with the S&P 500, the Nikkei 225 and the MSCI Emerging Market Index down 9.4%, 8.2% and 10.9% respectively.

The local market was up 5.1% in rand terms, but was down 11.45% in USD terms, given that the rand was one of the worst performing currencies globally. Very strong commodity prices (including: platinum up 30.8%, gold up 9.9%, copper up 27.6% and oil up 7.3%) supported the Resources sector (up 16.5%), on the back of expectations for buoyant commodity demand out of Asia and continued supply disruptions. Investment demand for commodities added to the momentum.

Most domestically-focussed shares were sharply down, driven by a long list of headwinds, including: massive electricity disruptions, political uncertainty, food and energy inflation, sharply higher interest rates and the global economic slowdown. Financials closed the quarter down 13.4%, while Industrials fared slightly better - down 5.5%.

Our Fund's relative performance over the quarter was very negatively affected by our underweight position in the Resources sector, particularly in: Anglo American (up 17.4%), BHP Billiton (up 16.2%) and Harmony (up 38%). Additional detractors from relative performance were positions in: Peregrine (down 25%), Old Mutual (down 22.9%) and Sun International (down 22.3%).

Mitigating the relative underperformance were our holdings in Mvela Resources (up 50.7%), Impala Platinum (up 33.2%) and Illovo (up 32.6%). We again avoided some of the quarter's worst performers, e.g. Netcare (-24.6%), Imperial (-24.1%) and Foschini (-20.5%).

Looking ahead, we are generally:
- Continuing to avoid interest rate-sensitive consumer cyclicals, despite remaining positive on the banks sector (although less so, given the worsening bad debt outlook) and media sector on valuation grounds
- much more negative on the resources stocks, given concerns about the impact of the global slowdown and the role played by (potentially temporary) investment demand for commodities in boosting prices, positive on the food retailers, given defensive demand and rampant food inflation
- positioning in high quality, cash generative global and local companies - particularly those not dependent on consumer demand, which we forecast to be very weak in the medium term
- avoiding companies, where margins are potentially at peak levels and could disappoint in the economic slowdown The fund remains fairly aggressively positioned in our best stock selections, based on our team's proven bottom-up stock picking process.

Gavin Wood
Portfolio Manager

The fourth quarter of 2007 was again volatile and generally saw equity markets heading lower. Despite this, the Fund produced a positive performance of 0.66% for the quarter. Again it outperformed its benchmark, the average performance of all funds in the General Equity unit trust category, which was down by 1.1%. For the 3-year period to December, the Fund is the second best performing unit trust in the General Equity sector (4th over one year and 5th over two years).

During the quarter, global liquidity continued to tighten and the potential spillover impact on the US consumer once again reignited fears of a US recession. In response, central banks moved to ease the current crisis by adopting a more accommodative monetary policy and by pumping additional liquidity into the monetary system. Gold strengthened 12.1% and the US dollar weakened a further 2.5%.

Equity markets moved lower over the quarter as investors remain concerned about the impact of a slowing US economy on global growth. Across developed markets, headline indices closed weaker with the S&P 500, the Nikkei 225 and the FTSE 100 closing down 3.8%, 8.8% and 0.2% respectively. Emerging markets posted respectable returns, with the MSCI Emerging Market index closing up 3.4%.

The local market followed developed markets into negative territory with the FTSE/JSE All-Share index closing the quarter down 3.0%. Resources was the worst performing sector (down 7.5%), driven by weaker prices for industrial metals and concerns around escalating costs for both the gold and platinum miners. Financials closed the quarter down 0.7%, driven by continued negative sentiment from the credit crisis and higher interest rates, as the local inflation outlook continued to deteriorate. Industrials continued to build on last quarter's positive momentum (+3.3%) and ended the quarter up 1.7%.

Our Fund's relative performance over the quarter was aided slightly by an underweight position in the resources sector, but most of the outperformance came from stock selection. Significantly contributing to relative performance were our holdings in Kumba Iron Ore (+26.1%), Exxaro (+18.9%), Shoprite (+19.6%) and Remgro (+13.4%). We again avoided some of the quarter's worst performers, e.g. Imperial (-19.1%) and Massmart (-12.3%).

Our main detractors from relative performance were our underweights in MTN (+22.5%) and Murray and Roberts (+14.4%). Our positions in Telkom (-20.5%) - on calling of its corporate actions and Naspers (-15.2%) - on purchasing a seemingly very expensive European internet business, subtracted from alpha.

Looking ahead, we are generally:
o avoiding interest rate sensitive consumer cyclicals, despite remaining positive on the banks sector on valuation grounds,
o remaining cautious on the resources stocks, given concerns about the impact of a slowdown in US consumer spending on global growth,
o positive on the food retailers, given defensive demand and rampant food inflation o positioning in high quality, cash generative global and local companies
o avoiding highly rated companies, where margins and ratings could disappoint

The fund remains fairly aggressively positioned in our best stock selections, based on our team's proven bottom-up stock picking process.

Gavin Wood
Portfolio Manager