The Fund returned -9.3% (before fees) and -9.5% (after fees) versus the FTSE/JSE All Share Index return of -13.2%. Once again the major declines were driven by Resources. The Fund's cash position, as well as the overweight exposure to food and other defensive stocks, was the main contributors to outperformance. In addition, Property has also benefited from investors' desire for an asset class removed from both cyclical growth and credit.

Amidst all the market volatility, it is tempting to focus on the financial fallout and ignore the changes in the real economy both locally and abroad.

Globally, companies linked to cyclical global growth and, or, easy credit conditions are the ones at most risk. Even though their share prices are depressed this is probably an accurate reflection of the future that they face. Companies geared for growth are the ones most at risk as their future earnings stream depends on access to credit as well as global cyclical forces to generate top-line growth. The Fund has very little exposure to these types of companies with the exception of African Rainbow (cyclical growth) and Netcare (access to credit).

The Fund has used the weakness in global markets to raise exposure to rand-hedge defensive stocks, namely MTN and SAB. Our sales have mainly come from the Resource sector. Although certain Resource counters look cheap after the recent declines, many will face an uphill struggle to grow earnings for the next five years.

The month of June turned out to be another negative month for equities, with the Fund delivering -6.2% and the FTSE/JSE All Share Index a return of -4.4%.

Very few shares ended the month in positive territory and again it was the Resources sector that outperformed the market, with Anglo American, Billiton and Gold stocks Harmony and Gold Fields - all producing positive returns for the month. In fact, the only financial and industrial sector to end the month in positive territory was Fixed Line Telecomms. This was on the back of Telkom's financial results and the market's growing confidence that the company will profit from a disposal of its 50% stake in Vodacom.

We remain cautious on the Resources stocks with some early evidence that the high commodity prices are curbing demand in some cases. The high oil prices have resulted in falling demand for SUV's and other highfuel consumption vehicles globally. The high price of Gold and Platinum has already led to a fall in jewelry sales in key markets such as Turkey and India. While the Fund has, in part, underperformed year to date as a result of our underweight position in Resources, we believe this is the appropriate position for these developing conditions.

On the domestic front, the outlook for the SA consumer has continued to deteriorate with further pressure from another 50bps rate hike announced in June, coupled with increased food and petrol prices. The Fund is currently underweight domestic banks and has limited exposure to credit retailers, with Foschini our only holding. The Fund continues to invest in companies in which we have confidence that they will deliver real earnings growth in an environment of high inflation and low economic growth. Examples of these are our holdings in Pick n Pay, Spar, Tiger Brands and Naspers.

The Fund returned -2.3% for the month, outperforming the FTSE/JSE Allshare return of -4.5%.

Given how weak global markets were, Mining stocks were particularly weak with Basic Materials declining 6.4%. Within Mining, Industrial Metal was the best performing sector for 2007, returning 59.8%. The Fund currently has a low weighting in the Mining sector and although the last four years have been good for this sector we anticipate 2008 to be a challenging year. With the exception of Gold and Oil, most mining companies have a weak earnings outlook for 2008 and 2009 and the deteriorating macro outlook has made this even worse.

Industrials remained mixed with the exception of the food and drug retailers which, given food inflation and strong food volumes, has been the best performing industrial sector for 2007 returning 50.7%. The Fund owns both Spar and Pick 'n Pay.

Within Financials the further hike in interest rates, in conjunction with the subprime event, has negatively affected Banks with the sector falling 6%. During the month, Nedcor performed well as its exposure to SA mortgages is low compared to the other SA banks. For the year as a whole Financials performed poorly despite starting the year with low valuations. Financials returned 3% for the year vs 19.2% for the FTSE Allshare. During the course of the year we have added to our financials, most notably Investec.